Prospectus June 28, 2016 EDELWEISS HOUSING FINANCE LIMITED Our Company was incorporated at Mumbai as Edelweiss Housing Finance Limited on May 30, 2008 as a public limited company under the Companies Act, 1956, as amended, and was granted a certificate of incorporation by the Registrar of Companies, Maharashtra at Mumbai (“RoC”). Our Company is registered as a non deposit accepting housing finance company with the National Housing Bank under Section 29A of the National Housing Bank Act, 1987. For further details, see the section titled “History, Main Objects and Key Agreements” on page 80 of this Prospectus. Corporate Identity Number of our Company is U65922MH2008PLC182906. Registered Office& Corporate Office: Edelweiss House, Off. C.S.T Road, Kalina, Mumbai - 400 098, Maharashtra, India Tel: +91 22 4009 4400; Fax: +91 22 4019 4925 Company Secretary and Compliance Officer: Mr. Kulprakash Singh; Tel: +91 1142629900; Fax: +91 11 4357 1122 E-mail: kulprakash.singh@edelweissfin.com; Website: www.edelweisshousingfin.com PUBLIC ISSUE BY EDELWEISS HOUSING FINANCE LIMITED (“COMPANY” OR THE “ISSUER”) OF SECURED REDEEMABLE NON CONVERTIBLE DEBENTURES (“NCDs”) OF FACE VALUE OF `1,000 AGGREGATING UP TO `2,500 MILLION, HEREINAFTER REFERRED TO AS THE “BASE ISSUE” WITH AN OPTION TO RETAIN OVER-SUBSCRIPTION UP TO `2,500 MILLION AGGREGATING UP TO `5,000 MILLION, HEREINAFTER REFERRED TO AS THE “ISSUE”. THE ISSUE IS BEING MADE PURSUANT TO THE PROVISIONS OF SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE AND LISTING OF DEBT SECURITIES) REGULATIONS, 2008 AS AMENDED (THE “SEBI DEBT REGULATIONS”), THE COMPANIES ACT, 2013 AND RULES MADE THEREUNDER AS AMENDED TO THE EXTENT NOTIFIED. PROMOTERS Our promoters are Edelweiss Financial Services Limited and Edelweiss Commodities Services Limited. For further details refer to the chapter “Our Promoter” on page 101 of this Prospectus. GENERAL RISKS For taking an investment decision, investors must rely on their own examination of the Issuer and the Issue, including the risks involved, specific attention of the Investor is invited to the section titled“Risk Factors”and“Material Developments”on page 10 and 117 respectively of this Prospectus. This Prospectus has not been and will not be approved by any regulatory authority in India, including the Securities and Exchange Board of India (“SEBI”), the National Housing Board (“NHB”), the Reserve Bank of India (“RBI”), any registrar of companies or any stock exchange in India. ISSUER’S ABSOLUTE RESPONSIBILITY The Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Prospectus contains all information with regard to the Issuer, which is material in the context of the Issue. The information contained in this Prospectus is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Prospectus as a whole or any of part of such information or the expression of any such opinions or intentions misleading, in any material respect. COUPON RATE, COUPON PAYMENT FREQUENCY, REDEMPTION DATE, REDEMPTION AMOUNT & ELIGIBLE INVESTORS For the details relating to Coupon Rate, Coupon Payment Frequency, Redemption Date and Redemption Amount of the NCDs, see section titled “Terms of the Issue” on page 161 of this Prospectus. For details relating to Eligible Investors please see “Issue related information” on page 156 on of this Prospectus. CREDIT RATINGS The NCDs proposed to be issued under this Issue have been rated ‘CARE AA [Double A]’ for an amount of `5,000 million, by Credit Analysis & Research Ltd. (“CARE”) vide their revalidation letter no. CARE/HO/RL/2016-17/1477 dated June 24, 2016, [ICRA] AA an amount of `5,000 million, by ICRA Limited vide their revalidation letter no 2016-16/ MUMR/0309 dated June 14, 2016, BWR AA+ an amount of `5,000 million, by Brickwork Ratings India Private Limited (“Brickwork”) vide their letter no. BWR/NCD/HO/ERC/ MM/0124/2016-17 dated June 23, 2016.The rating of NCDs by CARE, ICRA Limited and Brickwork indicate that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk. For the rationale for these ratings, see Annexure A of this Prospectus. This rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. This rating is subject to revision or withdrawal at any time by the assigning rating agencies and should be evaluated independently of any other ratings. LISTING The NCDs offered through this Prospectus are proposed to be listed on the BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”) (“Stock Exchanges”). Our Company has received an ‘in-principle’ approval from the BSE Limited vide its letter no. DCS/BM/PI-BOND/15/15-16 dated June 24, 2016 and NSE vide its letter no. NSE/LIST/77706 dated June 24, 2016. For the purposes of the Issue BSE Limited shall be the Designated Stock Exchange. PUBLIC COMMENTS The Draft Prospectus dated June 17, 2016 has been filed with BSE and NSE, pursuant to Regulation 6(2) of the SEBI Debt Regulations and was open for public comments for a period of seven Working Days (i.e., until 5 p.m.) from the date of filing of the Draft Prospectus with the Stock Exchanges. LEAD MANAGERS TO THE ISSUE DEBENTURE TRUSTEE* REGISTRAR TO THE ISSUE SBI CAPITAL MARKETS LIMITED 202, Maker Tower E Cuffe Parade, Mumbai – 400 005, Maharashtra, India Tel: +91 22 2217 8300 Fax: +91 22 2218 8332 E-mail: ehfl[email protected]Investor Grievance Email: investor. [email protected]Website: www.sbicaps.com Contact Person: Mr. Gitesh Vargantwar/ Mr. Aditya Deshpande SEBI Registration No : INM000003531 EDELWEISS FINANCIAL SERVICES LIMITED** Edelweiss House, Off CST Road, Kalina, Mumbai 400 098, Maharashtra, India Tel: +91 22 4086 3535 Fax: +91 22 4086 3610 Email: ehfl.ncd@edelweissfin.com Investor Grievance Email: customerservice.mb@ edelweissfin.com Website: www.edelweissfin.com Contact Person: : Mr. Lokesh Singhi/ Mr. Mandeep Singh SEBI Registration No.: INM0000010650 IDBI Trusteeship Services Limited Asian Building, Ground floor, 17, R Kamani Marg, Ballard Estate, Mumbai-400 001, Maharashtra, India Tel: +91 22 4080 7003; Fax: +91 22 6631 1776 Email: [email protected]Investor Grievance email: response@ idbitrustee.com Website: www.idbitrustee.com Contact Person: Mr. Shivaji Gunware SEBI Registration Number: IND0000000460 Karvy Computershare Private Limited Karvy Selenium Tower B, Plot 31-32, Financial District, Nanakramguda, Gachibowli, Hyderabad – 500 032, India Tel: +91 40 67162222 Fax: +91 40 23431551 Email: [email protected]Investor Grievance Email: edelweisshousingfi[email protected]Website: www.karisma.karvy.com Contact Person: Mr. M Murali Krishna SEBI Registration Number: INR000000221 CIN: U72400TG2003PTC041636 ISSUE PROGRAMME *** ISSUE OPENS ON: July 8, 2016 ISSUE CLOSES ON: July 27, 2016 *IDBI Trusteeship Services Limited under regulation 4(4) of SEBI Debt Regulations has by its letter no.1363/OPR/ITSL/2016 dated June 2, 2016 given its consent for its appointment as Debenture Trustee to the Issue and for its name to be included in this Prospectus and in all the subsequent periodical communications sent to the holders of the NCDs, issued pursuant to this Issue. A copy of the Prospectus shall be filed with the Registrar of Companies, Maharashtra at Mumbai in terms of Section 26 and 31of Companies Act, 2013, along with the endorsed/certified copies of all requisite documents. For further details please refer to the section titled “Material Contracts and Documents for Inspection” on page 216 of this Prospectus. ** Edelweiss Financial Services Limited (EFSL) is one of the Promoters of our Company. As EFSL is the holding company of our Company and there are common directors between EFSL and our Company, EFSL is deemed to be our associate as per the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, as amended (Merchant Bankers Regulations). Further, in compliance with the provisions of Regulation 21A (1) and explanation to Regulation 21A (1) of the Merchant Bankers Regulations, EFSL would be involved only in marketing of the Issue. ***The Issue shall remain open for subscription on Working Days from 10 a.m. to 5 p.m. during the period indicated above, except that the Issue may close on such earlier date or extended date as may be decided by the Board of Director of our Company (“Board”) or a duly constituted committee thereof. In the event of an early closure or extension of the Issue, our Company shall ensure that notice of the same is provided to the prospective investors through an advertisement in a reputed daily national newspaper with wide circulation on or before such earlier or extended date of Issue closure. On the Issue Closing Date, the Application Forms will be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) and uploaded until 5 p.m. or such extended time as may be permitted by the BSE and NSE.
Transcript
ProspectusJune 28, 2016
EDELWEISS HOUSING FINANCE LIMITEDOur Company was incorporated at Mumbai as Edelweiss Housing Finance Limited on May 30, 2008 as a public limited company under the Companies Act, 1956, as amended, and was granted a certificate of incorporation by the Registrar of Companies, Maharashtra at Mumbai (“RoC”). Our Company is registered as a non deposit accepting housing finance company with the National Housing Bank under Section 29A of the National Housing Bank Act, 1987. For further details, see the section titled “History, Main Objects and Key Agreements” on page 80 of this Prospectus.
Corporate Identity Number of our Company is U65922MH2008PLC182906.Registered Office& Corporate Office: Edelweiss House, Off. C.S.T Road, Kalina, Mumbai - 400 098, Maharashtra, India
PUBLIC ISSUE BY EDELWEISS HOUSING FINANCE LIMITED (“COMPANY” OR THE “ISSUER”) OF SECURED REDEEMABLE NON CONVERTIBLE DEBENTURES (“NCDs”) OF FACE VALUE OF `1,000 AGGREGATING UP TO `2,500 MILLION, HEREINAFTER REFERRED TO AS THE “BASE ISSUE” WITH AN OPTION TO RETAIN OVER-SUBSCRIPTION UP TO `2,500 MILLION AGGREGATING UP TO `5,000 MILLION, HEREINAFTER REFERRED TO AS THE “ISSUE”. THE ISSUE IS BEING MADE PURSUANT TO THE PROVISIONS OF SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE AND LISTING OF DEBT SECURITIES) REGULATIONS, 2008 AS AMENDED (THE “SEBI DEBT REGULATIONS”), THE COMPANIES ACT, 2013 AND RULES MADE THEREUNDER AS AMENDED TO THE EXTENT NOTIFIED.
PROMOTERSOur promoters are Edelweiss Financial Services Limited and Edelweiss Commodities Services Limited. For further details refer to the chapter “Our Promoter” on page 101 of this Prospectus.
GENERAL RISKSFor taking an investment decision, investors must rely on their own examination of the Issuer and the Issue, including the risks involved, specific attention of the Investor is invited to the section titled“Risk Factors”and“Material Developments”on page 10 and 117 respectively of this Prospectus. This Prospectus has not been and will not be approved by any regulatory authority in India, including the Securities and Exchange Board of India (“SEBI”), the National Housing Board (“NHB”), the Reserve Bank of India (“RBI”), any registrar of companies or any stock exchange in India.
ISSUER’S ABSOLUTE RESPONSIBILITYThe Issuer, having made all reasonable inquiries, accepts responsibility for, and confirms that this Prospectus contains all information with regard to the Issuer, which is material in the context of the Issue. The information contained in this Prospectus is true and correct in all material respects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Prospectus as a whole or any of part of such information or the expression of any such opinions or intentions misleading, in any material respect.
COUPON RATE, COUPON PAYMENT FREQUENCY, REDEMPTION DATE, REDEMPTION AMOUNT & ELIGIBLE INVESTORSFor the details relating to Coupon Rate, Coupon Payment Frequency, Redemption Date and Redemption Amount of the NCDs, see section titled “Terms of the Issue” on page 161 of this Prospectus. For details relating to Eligible Investors please see “Issue related information” on page 156 on of this Prospectus.
CREDIT RATINGSThe NCDs proposed to be issued under this Issue have been rated ‘CARE AA [Double A]’ for an amount of `5,000 million, by Credit Analysis & Research Ltd. (“CARE”) vide their revalidation letter no. CARE/HO/RL/2016-17/1477 dated June 24, 2016, [ICRA] AA an amount of `5,000 million, by ICRA Limited vide their revalidation letter no 2016-16/MUMR/0309 dated June 14, 2016, BWR AA+ an amount of `5,000 million, by Brickwork Ratings India Private Limited (“Brickwork”) vide their letter no. BWR/NCD/HO/ERC/MM/0124/2016-17 dated June 23, 2016.The rating of NCDs by CARE, ICRA Limited and Brickwork indicate that instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations and carry very low credit risk. For the rationale for these ratings, see Annexure A of this Prospectus. This rating is not a recommendation to buy, sell or hold securities and investors should take their own decision. This rating is subject to revision or withdrawal at any time by the assigning rating agencies and should be evaluated independently of any other ratings.
LISTINGThe NCDs offered through this Prospectus are proposed to be listed on the BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”) (“Stock Exchanges”). Our Company has received an ‘in-principle’ approval from the BSE Limited vide its letter no. DCS/BM/PI-BOND/15/15-16 dated June 24, 2016 and NSE vide its letter no. NSE/LIST/77706 dated June 24, 2016. For the purposes of the Issue BSE Limited shall be the Designated Stock Exchange.
PUBLIC COMMENTSThe Draft Prospectus dated June 17, 2016 has been filed with BSE and NSE, pursuant to Regulation 6(2) of the SEBI Debt Regulations and was open for public comments for a period of seven Working Days (i.e., until 5 p.m.) from the date of filing of the Draft Prospectus with the Stock Exchanges.
LEAD MANAGERS TO THE ISSUE DEBENTURE TRUSTEE* REGISTRAR TO THE ISSUE
SBI CAPITAL MARKETS LIMITED202, Maker Tower E Cuffe Parade,Mumbai – 400 005,Maharashtra, IndiaTel: +91 22 2217 8300 Fax: +91 22 2218 8332E-mail: [email protected] Grievance Email: [email protected]: www.sbicaps.comContact Person: Mr. Gitesh Vargantwar/ Mr. Aditya DeshpandeSEBI Registration No : INM000003531
ISSUE OPENS ON: July 8, 2016 ISSUE CLOSES ON: July 27, 2016
*IDBI Trusteeship Services Limited under regulation 4(4) of SEBI Debt Regulations has by its letter no.1363/OPR/ITSL/2016 dated June 2, 2016 given its consent for its appointment as Debenture Trustee to the Issue and for its name to be included in this Prospectus and in all the subsequent periodical communications sent to the holders of the NCDs, issued pursuant to this Issue.A copy of the Prospectus shall be filed with the Registrar of Companies, Maharashtra at Mumbai in terms of Section 26 and 31of Companies Act, 2013, along with the endorsed/certified copies of all requisite documents. For further details please refer to the section titled “Material Contracts and Documents for Inspection” on page 216 of this Prospectus.** Edelweiss Financial Services Limited (EFSL) is one of the Promoters of our Company. As EFSL is the holding company of our Company and there are common directors between EFSL and our Company, EFSL is deemed to be our associate as per the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, as amended (Merchant Bankers Regulations). Further, in compliance with the provisions of Regulation 21A (1) and explanation to Regulation 21A (1) of the Merchant Bankers Regulations, EFSL would be involved only in marketing of the Issue.***The Issue shall remain open for subscription on Working Days from 10 a.m. to 5 p.m. during the period indicated above, except that the Issue may close on such earlier date or extended date as may be decided by the Board of Director of our Company (“Board”) or a duly constituted committee thereof. In the event of an early closure or extension of the Issue, our Company shall ensure that notice of the same is provided to the prospective investors through an advertisement in a reputed daily national newspaper with wide circulation on or before such earlier or extended date of Issue closure. On the Issue Closing Date, the Application Forms will be accepted only between 10 a.m. and 3 p.m. (Indian Standard Time) and uploaded until 5 p.m. or such extended time as may be permitted by the BSE and NSE.
TABLE OF CONTENTS
SECTION I - GENERAL ....................................................................................................................................... 1
CERTAIN CONVENTIONS, USE OF FINANCIAL, INDUSTRY AND MARKET DATA AND CURRENCY
OF PRESENTATION ............................................................................................................................................ 8
SECTION II - RISK FACTORS .......................................................................................................................... 10
SECTION III - INTRODUCTION ....................................................................................................................... 30
GENERAL INFORMATION ............................................................................................................................... 30
CAPITAL STRUCTURE ..................................................................................................................................... 39
OBJECTS OF THE ISSUE .................................................................................................................................. 43
STATEMENT OF TAX BENEFITS .................................................................................................................... 45
SECTION IV - ABOUT OUR COMPANY ......................................................................................................... 54
INDUSTRY .......................................................................................................................................................... 54
OUR BUSINESS .................................................................................................................................................. 67
HISTORY MAIN OBJECTS AND KEY AGREEMENTS ................................................................................. 82
REGULATIONS AND POLICIES ...................................................................................................................... 85
TERMS OF THE ISSUE .................................................................................................................................... 161
“potential”, “project”, “pursue”, “shall”, “seek”, “should”, “will”, “would”, or other words or phrases of similar
import. Similarly, statements that describe our strategies, objectives, plans or goals are also forward-looking
statements. All statements regarding our expected financial conditions, results of operations, business plans and
prospects are forward-looking statements. These forward-looking statements include statements as to our
business strategy, revenue and profitability, new business and other matters discussed in this Prospectus that are
not historical facts. All forward-looking statements are subject to risks, uncertainties and assumptions about us
that could cause actual results to differ materially from those contemplated by the relevant forward-looking
statement. Important factors that could cause actual results to differ materially from our expectations include,
among others:
our ability to manage our credit quality;
interest rates and inflation in India;
growth prospects of the Indian housing and urban infrastructure sector and related policy developments;
changes in the demand and supply scenario in housing and urban infrastructure sector in India ;;
general, political, economic, social and business conditions in Indian and other global markets;
our ability to successfully implement our strategy, growth and expansion plans;
change in the government regulations;
performance of the Indian debt and equity markets;
our ability to comply with certain specific conditions prescribed by the GoI in relation to our business
changes in laws and regulations applicable to companies in India, including foreign exchange control
regulations in India; and
other factors discussed in this Prospectus, including under the section titled “Risk Factors” on page 10 of
this Prospectus.
Additional factors that could cause actual results, performance or achievements to differ materially include, but
are not limited to, those discussed in the section titled “Our Business” and “Outstanding Litigations and
Defaults” on pages 67 and 135 respectively of this Prospectus. The forward-looking statements contained in this
Prospectus are based on the beliefs of management, as well as the assumptions made by, and information
currently available to management. Although our Company believes that the expectations reflected in such
forward-looking statements are reasonable as of the date of this Prospectus, our Company cannot assure
investors that such expectations will prove to be correct. Given these uncertainties, investors are cautioned not
to place undue reliance on such forward-looking statements. If any of these risks and uncertainties materialize,
or if any of our underlying assumptions prove to be incorrect, our actual results of operations or financial
condition could differ materially from that described herein as anticipated, believed, estimated or expected. All
subsequent forward-looking statements attributable to us are expressly qualified in their entirety by reference to
these cautionary statements.
Neither the Lead Managers, our Company, its Directors and its officers, nor any of their respective affiliates or
associates have any obligation to update or otherwise revise any statements reflecting circumstances arising
after the date hereof or to reflect the occurrence of underlying events, even if the underlying assumptions do not
come to fruition. In accordance with the SEBI Debt Regulations, our Company, the Lead Managers will ensure
that investors in India are informed of material developments between the date of filing the Prospectus with the
Stock Exchanges and the date of the Allotment.
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SECTION II - RISK FACTORS
An investment in NCDs involves a certain degree of risk. You should carefully consider all the information
contained in this Prospectus, including the risks and uncertainties described below, and the information
provided in the sections titled “Our Business” on page 67 and “Financial Statements” on page 116 before
making an investment decision. The risk factors set forth below do not purport to be complete or comprehensive
in terms of all the risk factors that may arise in connection with our business or any decision to purchase, own
or dispose of the NCDs. The following risk factors are determined on the basis of their materiality. In
determining the materiality of risk factors, we have considered risks which may not be material individually but
may be material when considered collectively, which may have a qualitative impact though not quantitative,
which may not be material at present but may have a material impact in the future. Additional risks, which are
currently unknown, if materialises, may in the future have a material adverse effect on our business, financial
condition and results of operations. The market prices of the NCDs could decline due to such risks and you may
lose all or part of your investment.
Unless specified or quantified in the relevant risk factors below, we are not in a position to quantify the
financial or other implication of any of the risks described in this section. This Prospectus also contains
forward-looking statements that involve risks and uncertainties. Our results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors, including events described below
and elsewhere in this Prospectus. Unless otherwise stated, the financial information used in this section is
derived from and should be read in conjunction with Financial Statements.
Internal Risk Factors
1. We are subject to periodic inspections by the NHB. Non-compliance with the NHB’s observations made
during any such inspections could adversely affect our reputation, business, financial condition, results
of operations and cash flows.
The NHB conducts periodic inspections of our books of accounts and other records for the purpose of
verifying the correctness or completeness of any statement, information or particulars furnished to the
NHB or for obtaining any information which our Company might have failed to furnish on being called
upon to do so. Inspection by the NHB is a regular exercise and is carried out periodically by the NHB for
all housing finance institutions under Section 24 of the NHB Act. In the past, the NHB had made certain
observations during its periodic inspections in connection with our operations.
Our Company was interalia subjected to NHB’s inspection under the provisions of the NHB Act, 1987 for
the financial position as on March 31, 2014. Subsequently NHB vide its letter dated July 28, 2015, bearing
reference number NHB(ND)//HFC/DRS/Sup./7338/2015 reported certain observations which inter alia
included computation of net owned fund, approval obtained from the shareholders, with regards to the
borrowing limit being more than 16 times of the NOF, in contravention of the NHB Directions, the
demand/call loans policy not being approved by the Board, and conflict of the MoA which omitted stating
that HFCs cannot be partners in a partnership firm, certain other discrepancies pertaining to KYC and
AML guidelines, and fair practices codes etc., were observed by the NHB.
Our Company replied to the said letter vide a letter dated August 31, 2015, inter-alia stating that that since
additional equity was infused in our Company on April 22, 2013, the NOF stood increased, and therefore
the borrowing limits sanctioned by the shareholders was within the prescribed 16 times limit of the NOF.
Also, since our Company did not intend to grant any demand or call loans the Board in its meeting held on
February 25, 2015 passed a resolution for not granting any demand or call loans. Our Company also
confirmed in its response to NHB that the MoA shall be suitably amended to reflect the change of HFCs
not being a partner in a partnership firm in accordance with the NHB Directions, with regards to
discrepancies pertaining to policies, our Company certified and confirmed to NHB that compliance has
either been carried out or actions for compliance have been taken up in line with NHB’s observations, etc.
Subsequently, NHB issued a follow up on compliance letter dated November 24, 2015 with advice and
directions to the Company to take requisite measures in order to comply with NHB’s directions, in
response to which our Company vide its letter dated January 8, 2016, replied to NHB detailing all the
actions undertaken to comply with NHB’s observations.
Further, in 2015, NHB conducted a credit inspection of our Company and vide a letter dated July 30, 2015
provided its observation’s such as, compliance with previous observations such as mentioning prepayment
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charges in our application forms, details of beneficiary loans not being reflected in our statement of
accounts along with certain specific observations, pertaining to cases of our loan account holders. Our
Company vide a letter dated October 23, 2015, responded to the NHB, categorically addressing all the
concerns raised by the NHB. Subsequently, NHB issued a follow up on compliance letter dated 3
November 2015 with advice and directions to the Company to take requisite measures in order to comply
with NHB’s observations in relation to the credit inspection, in response to which our Company vide its
letter dated November 18, 2015, replied to NHB submitting the requite details of actions undertaken in
order to comply with NHB’s directions.
Even though we have provided the NHB with necessary clarifications and taken necessary steps to comply
with the NHB’s observations, any adverse notices or orders by the NHB during any future inspections
could adversely affect our reputation, business, financial condition, results of operations and cash flows.
2. We are a HFC and therefore subject to various regulatory and legal requirements. Also, future
regulatory changes may have a material adverse effect on our business, results of operations and
financial condition.
Our business is highly-regulated. The operations of a HFC in India are subject to various regulations
framed by the Ministry of Corporate Affairs and the NHB, amongst others. We are also subject to the
corporate, taxation and other laws in effect in India which require continued monitoring and compliance.
These regulations, apart from regulating the manner in which a company carries out its business and
internal operation, prescribe various periodical compliances and filings including but not limited to filing
of forms and declarations with the relevant registrar of companies, and the NHB. Pursuant to the NHB
regulations, HFCs are currently required to maintain a minimum CRAR consisting of Tier I and Tier II
capital which collectively shall not be less than 12.00% of their aggregate risk weighted assets and their
risk adjusted value of off-balance sheet items.
In particular, according to the NHB Directions, 2010, at no point can our total Tier II capital exceed 100%
of the Tier I capital. For further details, please see the section titled “Regulations and Policies”. This ratio
is used to measure an HFC’s capital strength and to promote the stability and efficiency of the housing
finance system. Our capital adequacy ratio, calculated in accordance with Indian GAAP, was 19.40% as at
March 31, 2016. As our asset book grows further our CRAR may decline and this may require us to raise
fresh capital. There is no assurance that NHB will not increase the minimum capital adequacy
requirements. Should we be required to raise additional capital in the future in order to maintain our CRAR
above the existing and future minimum required levels, we cannot guarantee that we will be able to obtain
this capital on favorable terms, in a timely manner or at all. Additionally, under Clause 29C of the NHB
Act, our Company is required to create a reserve fund and transfer to such fund an amount of no less than
20% of its net profits every year before any dividend is declared. If we fail to meet the requirements
prescribed by the NHB, then the NHB may take certain actions, including but not limited to levying
penalties, restricting our lending activities, investment activities and asset growth, and suspending all but
our low-risk activities and imposing restrictions on the payment of dividends.
The requirement for compliance with such applicable regulations presents a number of risks, particularly in
areas where applicable regulations may be subject to varying interpretations. Further, if the interpretations
of the regulators and authorities with respect to these regulations vary from our interpretation, we may be
subject to penalties and the business of the Company could be adversely affected.
Furthermore, we are also subject to changes in Indian laws, regulations and accounting principles. There
can be no assurance that the laws and regulations governing companies in India will not change in the
future or that such changes or the interpretations or enforcement of existing and future laws and rules by
governmental and regulatory authorities will not affect our business and future financial performance. The
introduction of additional government controls or newly implemented laws and regulations, depending on
the nature and extent thereof and our ability to make corresponding adjustments, may result in a material
adverse effect on our business, results of operations and financial condition and our future growth plans. In
particular, decisions taken by regulators concerning economic policies or goals that are inconsistent with
our interests, could adversely affect our results of operations.
We cannot assure you that our Company will be in compliance with the various regulatory and legal
requirements in a timely manner or at all. Further, we cannot assure you that we will be able to adapt to
new laws, regulations or policies that may come into effect from time to time with respect to the housing
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finance industry in general. Further, changes in tax laws may adversely affect demand for real estate and
therefore, for housing finance in India.
3. Our business is vulnerable to interest rate volatility and we will be impacted by any volatility in such
interest rates in our operations, which could cause our net interest margins to decline and adversely
affect our profitability.
A significant component of our income is the interest income we receive from the loans we disburse. Our
interest income is affected by any volatility in interest rates in our lending operations. Interest rates are
highly volatile due to many factors beyond our control, including the monetary policies of the RBI,
deregulation of the financial sector in India, domestic and international economic and political conditions.
If there is an increase in the interest rates that we pay on our borrowings, which we are unable to pass to
our customers, we may find it difficult to compete with our competitors, who may have access to lower
cost funds.
Further, we may lend money on a long-term, fixed interest rate basis, typically without an escalation clause
in our loan agreements. Any increase in interest rates over the duration of such loans may result in our
losing potential interest income. Our failure to pass on increased interest rates on our borrowings may
cause our net interest income to decline, which would decrease our return on assets and could adversely
affect our business, future financial performance and result of operations.
Moreover, when interest rates decline, we are subject to greater re-pricing and prepayment risks as
borrowers take advantage of the attractive interest rate environment. In periods of low interest rates and
high competition among lenders, borrowers may seek to reduce their borrowing cost by asking lenders to
re-price loans. If we are required to restructure loans, it could adversely affect our profitability. If borrowers
prepay loans, the return on our capital may be impaired if we are not able to deploy the received funds at
similar interest rates.
4. Any increase in the levels of non-performing assets in our loan portfolio, for any reason whatsoever,
would adversely affect our business, results of operations and financial condition.
With the growth in our business, we expect an increase in our loan portfolio. Should the overall credit
quality of our loan portfolio deteriorate, the current level of our provisions may not be adequate to cover
further increases in the amount of our NPAs. There can be no assurance that there will be no further
deterioration in our provisioning coverage as a percentage of gross NPAs or otherwise, or that the
percentage of NPAs that we will be able to recover will be similar to our past experience of recoveries of
NPAs.
As at March 31, 2016, our gross NPAs as a percentage of our outstanding loans was 1.17% and our net
NPAs, as a percentage of our outstanding loans, was 0.83%. The provisioning in respect of our outstanding
loan portfolio has been undertaken in accordance with the NHB guidelines and other applicable laws.
However, these provisioning requirements may require us to reserve lower amounts than the provisioning
requirements applicable to financial institutions and banks in other countries. The provisioning
requirements may also require the exercise of subjective judgments of management. The level of our
provisions may be inadequate to cover further increases in the amount of our non-performing loans or
decrease in the value of the underlying collateral. If our provisioning requirements are insufficient to cover
our existing or future levels of non-performing loans or other loan losses that may occur, or if future
regulation requires us to increase our provisions, our ability to raise additional capital and debt funds at
favorable terms as well as our results of operations, liquidity and financial condition could be adversely
affected.
In addition, provisioning norms may be revised by the NHB and become more stringent for HFCs. For
instance, the NHB Directions, 2010, have been amended by notification no. NHB.HFC.DIR.3/CMD/2011
dated August 5, 2011, notification no. NHB.HFC.DIR.4/CMD/2012 dated January 19, 2012, and
notification no. NHB.HFC.DIR.9/CMD/2013 dated September 6, 2013. As a result of the aforesaid
notifications, we have had to increase our provisioning in accordance with these norms as they changed.
For further details, please refer to the chapter “Regulations and Policies” on page 85.
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If the quality of our loan portfolio deteriorates or we are unable to implement effective monitoring and
collection methods, our financial condition and results of operations may be affected. In addition, we
anticipate that the size of our loan portfolio will grow as a result of our expansion strategy in existing as
well as new products, which will expose us to an increased risk of defaults.
A significant number of our customers are part of the low and middle income segment and are generally
more likely to be affected by declining economic conditions than larger corporate borrowers. If our
customers are unable to meet their financial obligation in a timely manner then it could adversely affect
our results of operation. Any negative trends or financial difficulties particularly among our borrowers
could increase the level of non-performing assets in our portfolio and adversely affect our business and
financial performance. If a significant number of our customers are unable to meet their financial
obligations in a timely manner it may lead to an increase in our level of NPAs. If we are not able to prevent
increases in our level of NPAs, our business and our future financial performance could be adversely
affected.
5. We regularly introduce new products, schemes for our customers, and there can be no assurance that
our new products will be profitable in the future.
We regularly introduce new products and schemes to expand our customer base. We may incur costs to
promote our new range of products and schemes and cannot guarantee that such new products and schemes
will be successful once offered, whether due to factors within or outside of our control, such as general
economic conditions, a failure to understand customer demand and market requirements. If we fail to
develop and launch these products and schemes successfully, we may lose a part or all of the costs incurred
in development and promotion or discontinue these products and schemes entirely, which could in turn
adversely affect our business and results of operations.
6. Our inability to obtain, renew or maintain our statutory and regulatory permits and approvals required
to operate our business may have a material adverse effect on our business, financial condition and
results of operations.
HFCs in India are subject to strict regulation and supervision by the NHB. In addition to the conditions
required for the registration as a HFC with the NHB, we are also required to comply with certain other
statutory and regulatory requirements for our business. In the future, we will be required to renew the
applicable permits and approvals and obtain new permits and approvals for the current and any proposed
operations. There can be no assurance that the relevant authorities will issue any of such permits or
approvals in the time-frame anticipated by us or at all. Failure by us to renew, maintain or obtain the
required permits or approvals may result in the interruption of our operations and may have a material
adverse effect on our business, financial condition and results of operation.
In addition, our branches are required to be registered under the relevant shops and establishments laws of
the states in which they are located. The shops and establishment laws regulate various employment
conditions, including working hours, holidays and leave and overtime compensation. If we fail to obtain or
retain any of these approvals or licenses, or renewals thereof, in a timely manner, or at all, our business
may be adversely affected. If we fail to comply, or a regulator claims we have not complied, with any of
these conditions, our certificate of registration may be suspended or cancelled and we shall not be able to
carry on such activities.
7. In order to sustain our growth, we will need to maintain a minimum capital adequacy ratio. There is no
assurance that we will be able to access the capital markets when necessary in order to maintain such a
ratio.
The NHB Directions require a minimum capital adequacy ratio comprising of Tier I and Tier II capital
aggregating to 12.00% to our total risk-weighted assets. The NHB Directions assign weightages to balance
sheet assets. We must maintain this minimum capital adequacy level to support our continuous growth. Our
capital adequacy ratio, calculated in accordance with Indian GAAP, was 19.40% on March 31, 2016. Our
ability to support and grow our business could be limited by a declining capital adequacy ratio if we are
unable to or have difficulty accessing the capital markets. Additionally, there is no assurance that the NHB
will not increase the current capital adequacy ratio.
14
8. As a HFC, we face the risk of default and non-payment by borrowers. Any such defaults and non-
payments would result in write-offs and/or provisions in our financial statements which may materially
adversely affect our profitability and asset quality.
Any lending activity is exposed to credit risk arising from the risk of default and non-payment
by borrowers. Our outstanding loan portfolio has grown at a CAGR of 49.50% from ₹ 4,776.16 million
as of March 31, 2012 to ₹ 23,872.67 million as of March 31, 2016. As at March 31, 2016, the size of our
outstanding loan portfolio was ₹ 23,872.67 million. The size of our loan portfolio is expected to
continue to grow as a result of our expansion strategy. A significant number of our customers are in the
low and middle income segment and are generally more likely to be affected by declining economic
conditions than larger corporate borrowers. As our portfolio expands, we will be exposed to an increasing
risk of defaults. Any negative trends or financial difficulties among our borrowers could increase the level
of non-performing assets in our portfolio and adversely affect our business and financial performance.
The borrowers may default in their repayment obligations due to various reasons including insolvency,
lack of liquidity, etc. Any such defaults and non-payments would result in write-offs and/or provisions in
our financial statements which may materially and adversely affect our profitability and asset quality.
9. If we fail to identify, monitor and manage risks and effectively implement our risk management policies,
it could have a material adverse effect on our business, financial condition, results of operations and
cash flows.
We have devoted resources to develop our risk management policies and procedures and aim to continue to
do so in the future. For details, see ‘Our Business’ on page 67. Despite this, our policies and procedures to
identify, monitor and manage risks may not be fully effective. Some of our risk management systems are
not automated and are subject to human error. Some of our methods of managing risks are based upon the
use of observed historical market behavior. As a result, these methods may not accurately predict future
risk exposures, which could be significantly greater than those indicated by the historical measures.
To the extent any of the instruments and strategies we use to hedge or otherwise manage our exposure to
market or credit risk are not effective, we may not be able to mitigate effectively our risk exposures in
particular market environments or against particular types of risk. Further, some of our risk management
strategies may not be effective in a difficult or less liquid market environment, where other market
participants may be attempting to use the same or similar strategies to deal with the difficult market
conditions. In such circumstances, it may be difficult for us to reduce our risk positions due to the activity
of such other market participants. Other risk management methods depend upon an evaluation of
information regarding markets, clients or other matters. This information may not in all cases be accurate,
complete, up-to-date or properly evaluated.
Our investment and interest rate risk are dependent upon our ability to properly identify, and mark-to-
market changes in the value of financial instruments caused by changes in market prices or rates. Our
earnings are dependent upon the effectiveness of our management of changes in credit quality and risk
concentrations, the accuracy of our valuation models and our critical accounting estimates and the
adequacy of our allowances for loan losses.
To the extent our assessments, assumptions or estimates prove inaccurate or not predictive of actual
results, we could suffer higher than anticipated losses. If we fail to effectively implement our risk
management policies, it could materially and adversely affect our business, financial condition, results of
operations and cash flows.
10. We are not permitted to have an aggregate exposure to capital markets in excess of 40% of our net
worth.
Pursuant to the NHB Directions, 2010, and directions thereunder, our Company, being a HFC, is not
permitted to have an aggregate exposure to capital markets (both fund and non-fund based) in excess of
40% of our net worth as of March 31, of the previous year. The capital market exposure of the Company as
on March 31, 2016 is within the limit as prescribed under NHB Directions, 2010. Within the overall
ceiling, direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds
and all exposures to venture capital funds should not exceed 20% of our net worth.
15
11. We may be unable to realize the expected value of collateral when borrowers default on their obligations
to us, which could have a material adverse effect on our business, financial condition, results of
operations and cash flows.
We follow internal risk management guidelines in relation to portfolio monitoring which, inter alia,
include a periodic assessment of loan to security value on the basis of conservative market price levels and
ageing analysis amongst others. However, we may not be able to realize the full value of the collateral as a
result of the following, among other factors:
defects or deficiencies in the perfection of collateral (including due to inability to obtain any
approvals that may be required from third parties);
fraud by borrowers;
errors in assessing the value of the collateral;
illiquid market for the sale of the collateral; and
applicable legislative provisions or changes thereto and past or future judicial pronouncements.
There is no assurance that we will be able to realise the full value of our security, due to the aforesaid
factors and among other things, delays on our part to take immediate action, economic downturns, adverse
court orders and fraudulent transfers by borrowers. In the event that a specialised regulatory agency asserts
jurisdiction over the enforcement proceedings, creditor actions can be further delayed. There can therefore
be no assurance that we will be able to foreclose on collateral on a timely basis, or at all, and if we are able
to foreclose on the collateral, that the value will be sufficient to cover the outstanding amounts owed to us,
which could have an adverse effect on our financial condition, results of operations and cash flows.
12. We and our Promoters and one of our Directors is involved in certain legal and other proceedings and
we cannot assure you that we will be successful in all of these actions. In the event we are unsuccessful
in litigating any or all of the disputes, our business and results of operations may be adversely affected. Our Company is involved in certain legal proceedings, including civil suits, consumer cases and tax
disputes. These legal proceedings are pending at different levels of adjudication before various courts,
investing authorities and tribunals. Further, one of our Directors have been named in criminal proceedings,
which are currently pending. For further details in relation to legal proceedings, see the section titled
“Outstanding Litigations and Defaults” on page 135.
We incur cost in defending these proceedings. We cannot provide any assurance in relation to the outcome
of these proceedings. Any adverse decision may have an adverse effect on our business, financial condition
and results of operations. Further, there is no assurance that similar proceedings will not be initiated
against us in the future.
13. We have high loan concentrations with our top twenty borrowers contributing to 15.83% of our total
loans outstanding as on March 31, 2016 and default by any one of them could significantly affect our
business.
As of March 31, 2016, aggregate loans to our twenty and ten largest borrowers amounted to ` 3,779.77
million and ` 2,491.81 million, representing 15.83% and 10.44% of our loan book of ` 23,872.67 million,
respectively. Our single largest borrower on such date had an outstanding balance of ` 380.35 million,
representing 1.59 % of our total loans outstanding as of March 31, 2016. Whilst we are currently allowed
by the NHB to extend an exposure of upto 15.00% of our net owned funds (NoF) to a single borrower, any
deterioration in the credit quality of these assets could have a significant adverse effect on our business,
prospects, results of operations, and financial condition.
14. Our Promoters have provided collateral and guarantees for loan facilities obtained by our Company,
and any failure or default by our Company to repay such loans in accordance with the terms and
conditions of the financing documents could trigger repayment obligations on them, which may impact
their ability to effectively service their obligations as our Promoters and thereby, adversely impact our
business and operations.
Edelweiss Financial Services Limited and Edelweiss Commodities Services Limited, our Promoters have
provided corporate guarantees in relation to the repayment of certain loan facilities availed by us. As at
March 31, 2016, outstanding amounts from credit facilities for which our Promoters have executed
16
corporate guarantees amounted to ` 11,555.81 million, which constituted 59.26% of our Company’s
outstanding indebtedness as on such date.
Any default or failure by our Company to repay its loan obligations in a timely manner, or at all could
trigger repayment obligations on the part of our Promoters, EFSL and/or ECSL, in respect of such loans,
which in turn, could have an impact on their ability to effectively service their obligations as Promoters of
our Company, thereby having an adverse effect on our business, results of operation and financial
condition. Furthermore, in the event that these promoters withdraw or terminate their corporate guarantees,
our lenders for such facilities may ask for alternate guarantees, repayment of amounts outstanding under
such facilities, or even terminate such facilities. We may not be successful in procuring guarantees
satisfactory to the lenders, and as a result may need to repay outstanding amounts under such facilities or
seek additional sources of capital, which could affect our financial condition and cash flows.
15. Financing of Indian housing is very competitive and increasing competition may result in declining
margins and market shares.
Interest rate deregulation, entry of commercial banks in the business of financing housing and other
liberalisation measures affecting the business of financing of housing sector, together with increased
demand for home finance, have increased competition significantly.
Historically, financing of housing was dominated by HFCs. While liberalisation has resulted in significant
growth in the market, it has also provided increased access for borrowers to alternative sources of housing
funding, in particular, from commercial banks. Most of the commercial banks have wider range of
products and services, greater financial resources and a lower average cost of funds than HFCs by having
access to retail deposits and greater marketing capabilities due to their more extensive branch networks. By
comparison, HFCs are more reliant on sources of funding with higher costs, such as syndicated loans and
debentures for their funding requirements, which affects their competitiveness in the market when
compared to banks. As a result, HFCs have lost market share to commercial banks in the Indian housing
and urban infrastructure finance sector.
As a result of increased competition, housing loans are becoming increasingly standard and terms such as
floating rate interest options, monthly rest periods and no pre-payment penalties are becoming increasingly
common. In addition, commercial banks and HFCs, including ourselves, have begun to include the cost of
registration, stamp duty and other associated costs as part of the loan disbursement, which has benefited
the borrower by increasing affordability. We cannot assure you that we will be able to retain our market
share in the increasingly competitive housing and urban infrastructure finance sector. Increasing
competition may have an adverse effect on our net interest margins and other operating income, and if we
are unable to compete successfully, our market share will decline as the origination of new loans declines.
16. If we are unable to sustain our growth effectively, our business and financial results could be adversely
affected.
A principal component of our strategy is to continue to diversify into development of our new product
portfolios to suit customer needs. This growth strategy will place significant demands on our management,
financial and other resources. It will require us to continuously develop and improve our operational,
financial and internal controls. Continuous expansion increases the challenges involved in financial
management, recruitment, training and retaining high quality human resources, preserving our culture,
values and entrepreneurial environment, and developing and improving our internal administrative
infrastructure. Failure to train our employees properly may result in an increase in employee attrition rates,
require additional hiring, erode the quality of customer service, divert management resources, increase our
exposure to high-risk credit and impose significant costs on us. If we grow our loan book too rapidly or fail
to make proper assessments of credit risks associated with the borrowers, a higher percentage of our loans
may become non-performing, which would have a negative impact on the quality of our assets and our
financial condition. Any inability on our part to manage such growth could disrupt our business prospects,
impact our financial condition and adversely affect our results of operations.
17. We may face asset-liability mismatches which could affect our liquidity and consequently may adversely
affect our operations and profitability.
We regularly monitor our funding levels to ensure we are able to satisfy the requirement for loan
disbursements and maturity of our liabilities. As is typical for HFCs, we maintain diverse sources of
17
funding and liquid assets to facilitate flexibility in meeting our liquidity requirements. Liquidity is
provided principally by long-term borrowings from banks and mutual funds, short and long-term general
financing through the domestic debt markets and retained earnings, proceeds from securitization and equity
issuances.
Our liquidity position could be adversely affected and we may be required to pay higher interest rates in
order to meet our liquidity requirements in the future, which could have a material adverse effect on our
business and financial results.
18. We do not own the premises in which our registered office is situated and is on leave and license basis.
In the event we lose such right to use, our business activities may be disrupted.
At present we do not own the premise where our registered office is located. Our registered office is
located on a premise which is owned by one of our Promoters, Edelweiss Commodities Services Limited
(“ECSL”) and is used by our Company on a rental basis, pursuant to a Memorandum of Understanding
(“MoU”) with ECSL, for usage of space and facilities management, with effect from April, 1, 2015. The
MoU is subject to review on an annual basis and incorporates the terms in relation to the rent payable for
the premise. Further, the MoU is not registered as per the requirements of Section 17 of the Registration
Act, 1908.
19. We do not own the premises where our branch offices are located and in the event our rights over the
properties is not renewed or is revoked or is renewed on terms less favourable to us, our business
activities may be disrupted.
At present we do not own the premises of any of our branch offices. In the event the owner of the premises
revokes the consent granted to us or fails to renew the tenancy, we may suffer disruption in our operations.
20. Our business is dependent on relationships with our clients established through, amongst others, our
branches. Closure of branches or loss of our key branch personnel may lead to damage to these
relationships and a decline in our revenue and profits.
Our business is dependent on the key branch personnel who directly manage client relationships. We
encourage dedicated branch personnel to service specific clients since we believe that this leads to long-
term client relationships, a trust based business environment and, over time, better cross-selling
opportunities. While no branch manager or operating group of managers contributes a meaningful
percentage of our business, our business may suffer materially if a substantial number of branch
managers either become ineffective or leave the Company.
21. As a HFC, we have significant exposure to the real estate sector and any negative events affecting this
sector could adversely affect our business and result of operations.
Our lending products include home loan, loan against property and construction finance. As of
March 31, 2016, almost entire loan portfolio of the Company was exposed to the real estate market.
The primary security for the loans disbursed by the Company is the underlying property; the value of this
security is largely dependent on housing market conditions prevalent at that time. The value of the
collateral on the loans disbursed by the Company may decline due to adverse market conditions including
an economic downturn or a downward movement in real estate prices. In the event the real estate sector is
adversely affected due to a decline of demand for real properties, changes in regulations or other trends or
events, which negatively impact the real estate sector, the value of our collaterals may diminish which may
affect our business and results of operations. Failure to recover the expected value of collateral could
expose the Company to losses and, in turn, result in a material adverse effect on our business, results of
operations and financial condition.
Following the introduction of the SARFAESI Act and the subsequent extension of its application to HFCs,
we are allowed to foreclose on secured property after 60 days’ notice to a borrower whose loan has been
classified as non-performing. Although the enactment of the SARFAESI Act has strengthened the rights of
creditors by allowing expedited enforcement of security in an event of default, there is still no assurance that
cannot guarantee that we will be able to realize the full value of our collateral, due to, among other things,
delays on our part in taking action to secure our property, defects in the perfection of collateral and
fraudulent transfers by borrowers.
18
22. Our growth in profitability depends on the continued growth of our loan portfolio.
Our results of operations depend on a number of internal and external factors, including changes in demand
for housing loans in India, the competitive landscape, our ability to expand geographically and diversify our
product offerings and the size of our loan portfolio. Changes in market interest rates could impact the
interest rates charged on our interest-earning assets in a way different to its effect on the interest rates paid
on our interest-bearing liabilities, and thus affecting the value of our investments. Further, we may
experience issues such as capital constraints. We cannot assure that we will be able to expand our existing
business and operations successfully, or that we will be able to retain existing personnel or to hire and train
new personnel to manage and operate our expanded business.
23. Any downgrade in our credit ratings may increase interest rates for refinancing our outstanding debt,
which would increase our financing costs, and adversely affect our future issuances of debt and our
ability to borrow on a competitive basis.
We have received ‘[ICRA] AA’, ‘CARE AA [Double A]’, and BWR AA+ credit rating by the ICRA
Limited, CARE and Brickwork respectively. These ratings indicate the high degree of safety regarding
timely servicing of financial obligations and allow us to access debt financing at competitive rates of
interest. Any downgrade in our credit ratings may increase interest rates for refinancing of our outstanding
debt, which would increase our financing costs, and adversely affect our future issuances of debt and our
ability to borrow on a competitive basis, which may adversely affect our business, results of operations and
financial condition.
24. Our contingent liabilities could adversely affect our financial condition.
As per the audited financial statements of our Company for year ended March 31, 2016, we had certain
contingent liabilities not provided for, amounting to ` 53.32 million. The details are as follows:
1. Contingent liabilities: Corporate guarantee given by the Company of Rs. 53.32 million (Previous year
Rs. Nil)
The contingent liability amounts disclosed in our audited financial statements represent estimates and
assumptions of our management based on advice received. The contingent liabilities have arisen in the
normal course of our business and are subject to the prudential norms as prescribed by the NHB. If, for any
reason, these contingent liabilities materialize, it may adversely affect our financial condition. For further
details, please refer to the chapter “Financial Statements” beginning on page 116.
25. Our significant indebtedness and the conditions and restrictions imposed by our financing
arrangements could restrict our ability to conduct our business and operations in the manner we desire.
As of March 31, 2016, we had outstanding secured loans of ` 14,174.28 million (includes long term
borrowings, short term borrowings and current maturities of long term debt, excluding interest accrued and
due on secured loans included in Other Current Liabilities) and unsecured loans of ` 5,324.49 million
(includes long term borrowings, short term borrowings and excluding interest accrued and due on
unsecured loans included in other current liabilities) and we will continue to incur additional indebtedness
in the future. Most of our borrowings are secured by our standard business receivables.
Some of our financing agreements also include various conditions and covenants that require us to obtain
lender consents prior to carrying out certain activities and entering into certain transactions. Failure to meet
these conditions or obtain these consents could have significant consequences on our business and
operations. Under some of our financing agreements, we require, and may be unable to obtain, consents
from the relevant lenders for, amongst others, the following matters: to declare and/ or pay dividend to any
of its shareholders whether equity or preference, during any financial year unless our Company has paid to
the lender the dues payable by our Company in that year, to undertake or permit any merger, amalgamation
or compromise with its shareholders, creditors or effect any scheme of amalgamation or reconstruction or
disposal of whole of the undertaking, to amend its MOA and AOA, etc. These covenants vary depending
on the requirements of the financial institution extending the loan and the conditions negotiated under each
financing document. Such covenants may restrict or delay certain actions or initiatives that we may
propose to take from time to time. Further, our lenders may recall certain short-term demand loans availed
19
of by us at any time. For details relating to our borrowings please see the section titled “Financial
Indebtedness” beginning on page 118.
26. Our success depends in large part upon our management team and key personnel and our ability to
attract, train and retain such persons. Our inability to attract and retain talented professionals, or the
resignation or loss of key management personnel, may have an adverse impact on our business and
future financial performance.
Our ability to sustain the rate of growth depends significantly upon selecting and retaining key managerial
personnel, developing managerial experience to address emerging challenges and ensuring a high standard
of client service. In order to be successful, we must attract, train, motivate and retain highly skilled
employees, especially branch managers and product executives. If we cannot hire additional qualified
personnel or retain them, our ability to expand our business will be impaired and our revenue could
decline. We will need to recruit new employees, who will have to be trained and integrated with our
operations. We will also have to train existing employees to adhere properly to internal controls and risk
management procedures. Failure to train and motivate our employees properly may result in an increase in
employee attrition rates, require additional hiring, erode the quality of customer service, divert
management resources, increase our exposure to high-risk credit and impose significant costs on us. Hiring
and retaining qualified and skilled managers is critical to our future, as our business model depends on our
credit-appraisal and asset valuation mechanism, which are personnel-driven. Moreover, competition for
experienced employees can be intense. While we have an incentive structure our inability to attract and
retain talented professionals, or the resignation or loss of key management personnel, may have an adverse
impact on our business and future financial performance.
27. We are party to certain legal proceedings and any adverse outcome in these or other proceedings may
adversely affect our business.
We are involved in several legal proceedings in the ordinary course of our business such as consumer
disputes, debt-recovery proceedings, proceedings under the SARFAESI Act, income tax proceedings and
civil disputes. These proceedings are pending at different levels of adjudication before various courts,
tribunals and appellate tribunals. A significant degree of judgment is required to assess our exposure in
these proceedings and determine the appropriate level of provisions, if any. There can be no assurance on
the outcome of the legal proceedings or that the provisions we make will be adequate to cover all losses
we may incur in such proceedings, or that our actual liability will be as reflected in any provision that we
have made in connection with any such legal proceedings.
Although we intend to defend or appeal any adverse order in relation to these proceedings, we will be
required to devote management and financial resources in their defence or prosecution. If a significant
number of these disputes are determined against our Company and if our Company is required to pay all
or a portion of the disputed amounts or if we are unable to recover amounts for which we have filed
recovery proceedings, there could be an adverse impact on our reputation, business, results of operations
and financial condition.
28. We may not be able to successfully sustain our growth rate.
In recent years, our growth has been fairly substantial. Our growth strategy includes growing our lending
and expanding our retail customer base. There can be no assurance that we will be able to sustain our
growth plan successfully or that we will be able to expand further or diversify our product portfolio. If we
grow our loan book too rapidly or fail to make proper assessments of credit risks associated with new
borrowers, a higher percentage of our loans may become non-performing, which would have a negative
impact on the quality of our assets and our financial condition.
We also face a number of operational risks in executing our growth strategy. We have experienced growth
in our corporate finance and loan against property businesses. Our rapid growth exposes us to a wide range
of increased risks, including business and operational risks, such as the possibility of growth of NPAs,
fraud risks and regulatory and legal risks.
Our ability to sustain our rate of growth also significantly depends upon our ability to recruit trained and
(c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or
to any other person in a fictitious name,
shall be liable for action under section 447.”
Minimum Subscription
In terms of the SEBI Debt Regulations, for an issuer undertaking a public issue of debt securities the minimum
subscription for public issue of debt securities shall be 75% of the Base Issue. If our Company does not receive
the minimum subscription of 75 % of the Base Issue, prior to the Issue Closing Date the entire subscription
amount shall be refunded to the Applicants within 12 days from the date of closure of the Issue. The refunded
subscription amount shall be credited only to the account from which the relevant subscription amount was
remitted. In the event, there is a delay, by our Company in making the aforesaid refund, our Company will pay
interest at the rate of 15% per annum for the delayed period.
Under Section 39(3) of the Companies Act, 2013 read with Rule 11(2) of the Companies (Prospectus and
Allotment of Securities) Rules, 2014 if the stated minimum subscription amount is not received within the
specified period, the application money received is to be credited only to the bank account from which the
subscription was remitted. To the extent possible, where the required information for making such refunds is
available with our Company and/or Registrar, refunds will be made to the account prescribed. However, where
our Company and/or Registrar does not have the necessary information for making such refunds, our Company
and/or Registrar will follow the guidelines prescribed by SEBI in this regard including its circular (bearing
CIR/IMD/DF-1/20/2012) dated July 27, 2012.
Credit Rating and rationale
CARE
The NCDs proposed to be issued under this Issue have been rated ‘CARE AA [Double A]’ for an amount of ₹
5,000 million, by Credit Analysis & Research Ltd. (“CARE”) vide their revalidation letter no.
CARE/HO/RL/2016-17/1477 dated June 24, 2016. The rating of NCDs by CARE indicates instruments with
this rating are considered to have a high degree of safety regarding timely servicing of financial obligations.
Such instruments carry very low credit risk.
The rationale for the aforementioned rating issued by CARE are as follows:
The rating of Edelweiss Housing Finance Limited (EHFL) factors in the diversified business profile of EFSL
(consolidated basis), good asset quality and comfortable liquidity profile. The rating also takes into account the
well-qualified and experienced management team, established institutional equity broking business and good
retail distribution network. The rating is, however, constrained by substantial proportion of revenue from the
capital markets related activities which has an inherent volatility, client concentration risk in its wholesale loan
portfolio, increasing gearing levels, risk associated with relatively new businesses and competitive scenario in
the capital markets. The performance of EFSL’s new businesses, competitive position in the capital market
businesses, asset quality, concentration levels in its wholesale lending portfolio and gearing levels are the key
rating sensitivities.
ICRA Limited
The NCDs proposed to be issued under this Issue have been rated ‘[ICRA] AA' by ICRA Limited for an amount
of up to ` 5,000 million vide its revalidation letter no 2016-16/MUMR/0309 dated June 14, 2016. The rating of
NCDs by ICRA Limited indicates instruments with this rating are considered to have a high degree of safety
regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
The rationale for the aforementioned rating issued by ICRA are as follows:
ICRA has taken a consolidated view on credit profile of key Edelweiss group companies (collectively referred to
as Edelweiss Group) owing to common promoters and senior management team, shared brand name, and
strong financial and operation synergies shared across the group companies. The ratings factor in Edelweiss
Group’s diversified business revenues constituted by its financing, commodities trading and broking operations,
strong presence in institutional broking and investment banking, group’s robust risk management systems and
38
adequate capitalisation profile backed by strong networth (Rs. 3858 crore as on December 31, 2015, for Edelweiss Group consolidated including minority interest). The ratings are further supported by steady improvement in the non capital markets related business with improved seasoning of the financing business. ICRA also takes note of the group’s improving liquidity profile with high liquid treasury assets and improving diversification in the resources profile. Brickwork The NCDs proposed to be issued under this Issue have been rated ‘BWR AA+’ by Brickwork for an amount of ` 5,000 million, vide their revalidation letter no. BWR/NCD/HO/ERC/MM/0124/2016-17 dated June 23, 2016. The rating of NCDs by Brickwork indicates instruments with this rating are considered to have a high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk. Consents The written consents of Directors of our Company, Company Secretary and Compliance Officer, our Statutory Auditors, the legal advisor, the Lead Managers, the Registrar to the Issue, Escrow Collection Bank(s), Refund Bank, Credit Rating Agencies, the Bankers to our Company, the Debenture Trustee, and the Lead Brokers to act in their respective capacities, will be filed along with a copy of the Prospectus with the ROC as required under Sections 26 of the Companies Act, 2013 and such consents have not been withdrawn up to the time of delivery with the Stock Exchanges. Utilisation of Issue proceeds For details on utilization of Issue proceeds please see “Objects of the Issue” on page 43 of this Prospectus. Issue Programme ISSUE OPENS ON July 8, 2016 ISSUE CLOSES ON July 27, 2016* * The subscription list for the Issue shall remain open for subscription upto 5 p.m. with an option for early closure or extension by such period, as may be decided at the discretion of the Board, subject to necessary approvals. In the event of such early closure of the Issue or extension of the Issue, our Company shall ensure that notice of such early closure or extension of the Issue is given as the case may be on such date of closure through advertisement/s in a leading national daily newspaper. Applications Forms for the Issue will be accepted only between 10.00 a.m. and 5.00 p.m. (Indian Standard Time) or such extended time as may be permitted by the Stock Exchanges, during the Issue Period as mentioned above on all Business Days, (i) by the Lead Managers, Lead Brokers or the Trading Members of the Stock Exchanges, as the case may be, at the centers mentioned in Application Form through the non-ASBA mode or, (ii) in case of ASBA Applications, (a) directly by the Designated Branches of the SCSBs or (b) Lead Managers, Lead Brokers or the Trading Members of the Stock Exchanges, as the case may be. On the Issue Closing Date the Application Forms will be accepted only between 10 a.m. and 3.00 p.m. (Indian Standard Time) and uploaded until 5.00 p.m. or such extended time as may be permitted by the Stock Exchanges. Due to limitation of time available for uploading the Applications on the Issue Closing Date, Applicants are advised to submit their Application Forms one day prior to the Issue Closing Date and, not later than 3.00 p.m (Indian Standard Time) on the Issue Closing Date. Applicants are cautioned that in the event a large number of Applications are received on the Issue Closing Date, all Applications may not be uploaded due to lack of sufficient time. Such Applications that cannot be uploaded will not be considered for allocation under the Issue. Application Forms will only be accepted on Working Days during the Issue Period. Neither our Company, nor the Lead Managers, Lead Brokers or Trading Members of the Stock Exchanges are liable for any failure in uploading the Applications due to failure in any software/ hardware systems or otherwise. Please note that the Basis of Allotment under the Issue will be on a date priority basis.
39
CAPITAL STRUCTURE
Details of share capital
The share capital of our Company as at date of this Prospectus is set forth below:
(` in million)
Share Capital In `
Authorised Share Capital
60,000,000 Equity shares of ` 10 each 600.00
Issued, Subscribed and Paid-up share capital
49,350,000 Equity shares of ` 10 each 493.50
Securities premium account
Existing Securities Premium Account 2,275.19
Securities Premium Account after the Issue 2,275.19
Changes in the Authorised Share Capital of our Company as on the date of this Prospectus:
Date of
AGM/EGM Alteration
August 19, 2011 The Authorised Share Capital of our Company was increased from ` 250 million divided
into 2,50,00,000 Equity Shares of ` 10 each to ` 270 million divided into 2,70,00,000
Equity Shares of ` 10 each, vide a resolution passed by the shareholders of our Company
May 21, 2012 The Authorised Share Capital of our Company was increased from ` 270 million divided
into 2,70,00,000 Equity Shares of ` 10 each to ` 300 million divided into 3,00,00,000
Equity Shares of ` 10 each, vide a resolution passed by the shareholders of our
Company.
March 26, 2013 The Authorised Share Capital of our Company was increased from ` 300 million divided
into 3,00,00,000 Equity Shares of ` 10 each to ` 315 million divided into 3,15,00,000
Equity Shares of ` 10 each, vide a resolution passed by the shareholders of our
Company.
March 3, 2014 The Authorised Share Capital of our Company was increased from ` 315 million divided
into 3,15,00,000 Equity Shares of ` 10 each to ` 385 million divided into 3,85,00,000
Equity Shares of ` 10 each, vide a resolution passed by the shareholders of our
Company.
February 25, 2015 The Authorised Share Capital of our Company was increased from ` 385 million divided
into 3,85,00,000 Equity Shares of ` 10 each to ` 600 million divided into 6,00,00,000
Equity Shares of ` 10 each, vide a resolution passed by the shareholders of our
Company.
40
1. Equity Share Capital History of our Company
The following is the history of the paid up Equity Share capital of our Company for the last five years ended
March 31, 2016:
Date of
Allotment
No of
Equity
Shares
Face
value
(Rs)
Issue
Price
(Rs.)
Considerati
on (Cash,
other cash,
etc)
Nature for
Allotment
Cumulative
No. of equity
shares
Equity
Share
Capital
(in `
million)
Equity
Share
Premium (in
` million.)
August 25,
2011
4,000,000 10 100 Cash Allotment to
Edelweiss Tradings
& Holdings Limited
2,68,50,000 268.50 466.00
May 28,
2012
2,500,000 10 100 Cash Allotment to
Comfort Projects
Limited*
29,350,000 293.50 691.00
April 22,
2013
1,500,000 10 100 Cash Allotment to
Edelweiss
Commodities
Services Limited
30,850,000 308.50 826.00
March 27,
2014
70,00,000 10 100 Cash Allotment to
Edelweiss
Commodities
Services Limited
37,850,000 378.50 1,456.00
March 27,
2015
11,000,000 10 100 Cash Right Issue to
Edelweiss
Commodities
Services
Limited
48,850,000 488.50 2,446.00
March 27,
2015
500,000 10 100 Cash Rights Issue to
Edelweiss Financial
Services Limited
49,350,000 493.50 2,491.00**
*presently known as Edelweiss Commodities Services Limited.
** this figure of Rs. 2,491.00 million (for March 31, 2015) is arrived at prior to deduction of ` 110.09 million towards the
provision for premium payable on redemption of debentures for year ended March 31, 2015.
2. Details of Promoters shareholding in our Company’s subsidiaries as on March 31, 2016:
Not Applicable
3. Shareholding of Directors in our Company
Nil
4. Shareholding of Directors in our Subsidiaries and Joint Venture
Not Applicable
5. Shareholding pattern of our Company as on March 31, 2016
Sr.
No Name of Shareholders
Total No. of
Equity Shares
No. of shares in
dematerialised
form
Total Shareholding
as % of total no. of
equity shares
1 Edelweiss Commodities Services
Limited
3,83,00,000 53,00,000 77.61%
2 Edelweiss Financial Services
Limited (EFSL)*
1,10,50,000 1,05,49,994 22.39%
Total 4,93,50,000 1,58,49,994 100.00%
*along with 6 nominees namely Mr. Rashesh Shah, Mr.Venkat Ramaswamy, Mr. Tarun Khurana
41
Mr.Deepak Mittal, Mr.Vikas Khemani and Mr. Himanshu Kaji holding one equity share each.
6. List of top ten holders of Equity Shares of our Company
Given below are details of the top 10 Equity shareholders of our Company as of March 31, 2016:
Sr.
No. Name
No. of Equity
Shares
No. of Equity
Shares held in
dematerialised
form
As % of total
number of
shares
1 Edelweiss Commodities Services
Limited
3,83,00,000 53,00,000 77.61%
2. Edelweiss Financial Services
Limited*
1,10,50,000 1,05,49,994 22.39%
Total 4,93,50,000 1,58,49,994 100.00%
*Includes 6 (six) nominee shareholders of EFSL holding one equity share each namely Mr. Rashesh Shah,
Mr.Venkat Ramaswamy, Mr. Tarun Khurana, Mr.Deepak Mittal, Mr.Vikas Khemani and Mr.Himanshu Kaji
7. Debt to equity ratio
The debt to equity ratio of our Company as on March 31, 2016 is as follows:
(` in Million)
Particulars Pre Issue Post Issue
Part A
Long term debts 9,815.35 14,815.35
Short term debts (including current maturity of long term debt) 9,683.43 9,683.43
Total debts 19,498.78 24,498.78
Shareholder’s funds
- Equity share capital 493.50 493.50
Reserves and surplus
- Securities premium account 2,275.19 2,275.19
- Special reserve under section 45-1C of Reserve Bank of India Act, 1934 135.85 135.85
- Surplus in the statement of profit and loss 481.24 481.24
Total shareholders’ funds 3,385.78 3,385.78
Part B
Total shareholders’ funds (A) 3,385.78 3,385.78
Less: Deferred tax assets (B) (24.30) (24.30)
Net worth (C) = (A) – (B) 3,361.48 3,361.48
Long term debt to equity ratio (Number of times) (Refer Note 4) 2.92 4.41
Total debt to equity ratio (Number of times) (Refer Note 5) 5.80 7.29
Notes:
1. Long term debt under “Pre Issue” column includes long term borrowings as per the note 2.3 of the
audited financial statements for the year ended 31 March 2016
2. Short term debt under “Pre Issue” column includes Short term borrowings and current maturities of
42
long term debt – secured as per the note 2.6 and 2.8 respectively of the audited financial statements for
the year ended 31 March 2016
3. Long term debts under “Post issue” column is computed on the basis that there is an inflow of Rs.
5,000 million from the proposed issue of secured redeemable non-convertible debentures, which will
have a maturity of more than one year, from 31 March 2016
4. Long term debt to equity ratio = Long term debts / Net worth
5. Total debt to equity ratio = Total debts / Net worth
8. Statement of the aggregate number of securities of the Issuer purchased or sold by the promoter
group and by the directors of the company which is a promoter of the Issuer and by the Directors
of the Issuer and their relatives within six months immediately preceding the date of filing this
Prospectus:
Save and except as disclosed herein, none of the Directors of the Company including their relatives as
defined under Section 2(77) of the Companies Act, 2013 and the Promoter/Promoter Group of the
Company have undertaken purchase and/or sale of the Securities of our Company during the preceding
6(six) months from the date of the Prospectus.
9. None of the Equity Shares are pledged or otherwise encumbered by the Promoter
10. Our Company has not made any acquisition or amalgamation in the last one year.
11. Our Company has not made any reorganization/ reconstruction in the last one year.
12. Our Company does not have any outstanding borrowings taken/ debt securities issued where taken /
issued (i) for consideration other than cash, whether in whole or part, in pursuance of an option.
13. Employee Stock Option Scheme:
Our Company does not have any employee stock option scheme.
43
OBJECTS OF THE ISSUE
Our Company is in the business of housing finance, and as part of our business operations, we raise/ avail funds
for onward lending and for repayment of principal of existing loans and payment of interest.
Our Company proposes to utilise the funds which are being raised through the Issue, after deducting the Issue
related expenses to the extent payable by our Company (“Net Proceeds”), estimated to be approximately ` 4,898.90 million, towards funding the following objects (collectively, referred to herein as the “Objects”):
1. For the purpose of onward lending, financing, and for repayment of interest and principal of existing
borrowings of the Company;
2. General Corporate Purposes;
The Main Objects clause of the Memorandum of Association of our Company permits our Company to
undertake the activities for which the funds are being raised through the present Issue and also the activities
which our Company has been carrying on till date.
The details of the Proceeds of the Issue are set forth in the following table: (in ` million)
Sr. No. Description Amount
1. Gross proceeds of the Issue 5,000.00
2. (less) Issue related expenses (101.10)
3. Net Proceeds 4,898.90
The above Issue related expenses are indicative and are subject to change depending on the actual level of
subscription to the Issue, the number of allottees, market conditions and other relevant factors.
Requirement of funds and Utilisation of Net Proceeds
The following table details the objects of the Issue and the amount proposed to be financed from the Net
Proceeds:
Sr. No. Objects of the Fresh Issue
Percentage of amount proposed
to be financed from Issue
Proceeds
1. Onward lending, financing, and for repayment of interest and
principal of existing borrowings of the Company; up to 75%
2. General Corporate Purposes* up to 25%
Total 100%
*The Net Proceeds will be first utilized towards the Objects mentioned above. The balance is proposed to be
utilized for general corporate purposes, subject to such utilization not exceeding 25% of the amount raised in
the Issue, in compliance with the SEBI Debt Regulations.
Funding plan
NA
Summary of the project appraisal report
NA
Schedule of implementation of the project
NA
Interim Use of Proceeds
Our Management, in accordance with the policies formulated by it from time to time, will have flexibility in
deploying the proceeds received from the Issue. Pending utilization of the proceeds out of the Issue for the
purposes described above, our Company intends to temporarily invest funds in high quality interest bearing
44
liquid instruments including money market mutual funds, deposits with banks or temporarily deploy the funds in
investment grade interest bearing securities as may be approved by the Board. Such investment would be in
accordance with the investment policies approved by the Board or any committee thereof from time to time.
Monitoring of Utilization of Funds
There is no requirement for appointment of a monitoring agency in terms of the SEBI Debt Regulations. For the
relevant Financial Years commencing from the Financial Year 2016-2017, our Company will disclose on a half
yearly basis, a statement indicating material deviations, if any, in the use of the proceeds of the Issue from the
objects stated in the Prospectus. This information shall be furnished to the stock exchanges along with the half
yearly financial results furnished to the Stock Exchanges and shall also be published in the newspapers
simultaneously along with the half yearly financial results.
Other Confirmations
In accordance with the SEBI Debt Regulations, our Company will not utilise the proceeds of the Issue for
providing loans to or for acquisitions of shares of any person who is a part of the same group as our Company or
who is under the same management of our Company.
No part of the proceeds from this Issue will be paid by us as consideration to our Promoter, our Directors, Key
Managerial Personnel, or companies promoted by our Promoter.
The Issue proceeds shall not be used for any purpose which is in contravention of the NHB guidelines
applicable to Housing Finance Companies.
The Issue proceeds shall not be utilised directly/indirectly towards capital markets and real estate purposes.
Hence, the subscription of the NCDs would not be considered/ treated as a capital market exposure.
No part of the proceeds from this Issue will be paid by us as consideration to our Promoter, our Directors, key
managerial personnel, or companies promoted by our Promoter, except payments to be made by way of fees and
commission to various Edelweiss Group companies that participate in the Issue as SEBI registered
intermediaries.
45
STATEMENT OF TAX BENEFITS
Statement of Possible Direct Tax Benefits available to Debenture Holder(s) of Edelweiss Housing Finance
Limited
The Board of Directors
Edelweiss Housing Finance Limited
Edelweiss House,
Off. CST Road, Kalina,
Mumbai – 400 098
Dear Sirs,
We hereby report that the enclosed annexure states the possible tax benefits available to the Non-Convertible
Debenture Holder(s) of Edelweiss Housing Finance Limited (‘the Company’) under the Income-tax Act, 1961
presently in force in India. Several of these benefits are dependent on the Debenture Holder(s) fulfilling the
conditions prescribed under the relevant tax laws. Hence, the ability of the Debenture Holder(s) to derive the tax
benefits is dependent upon fulfilling such conditions, which are based on business imperatives the Debenture
Holder(s) would face in the future. The Debenture Holder(s) may or may not choose to fulfill such conditions.
The benefits discussed in the enclosed annexure are not exhaustive. This statement is only intended to provide
general information to the investors and is neither designed nor intended to be a substitute for professional tax
advice. In view of the individual nature of the tax consequences and the changing tax laws, each investor is
advised to consult their own tax consultant with respect to the specific tax implications arising out of their
participation in the issue.
We do not express any opinion or provide any assurance as to whether:
the Debenture Holder(s) will continue to obtain these benefits in future; or
the conditions prescribed for availing the benefits have been/would be met with.
The contents of the enclosed annexure are based on information, explanations and representations obtained from
the Company and on the basis of our understanding of the business activities and operations of the Company.
No assurance is given that the revenue authorities/ Courts will concur with the views expressed herein. Our
views are based on existing provisions of law and its interpretation, which are subject to change from time to
time. We do not assume any responsibility to update the views consequent to such changes. We shall not be
liable to the Company for any claims, liabilities or expenses relating to this assignment except to the extent of
fees relating to this assignment, as finally judicially determined to have resulted primarily from bad faith or
intentional misconduct. We are not liable to any other person in respect of this statement.
This certificate is provided solely for the purpose of assisting the addressee Company in discharging its
responsibilities under the Securities and Exchange Board of India (Issue and Listing of Debt Securites)
Regulations, 2008, as amended.
For B S R & Associates LLP
Chartered Accountants
Firm’s Registration No: 116231W/W100024
N Sampath Ganesh
Partner
Membership No: 042554
Place: Mumbai
Date: 17 June 2016
46
ANNEXURE: STATEMENT OF TAX BENEFITS
STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO THE DEBENTURE HOLDER(S)
Under the existing provisions of law, the following tax benefits, inter-alia, will be available to the Debenture
Holder(s). The tax benefits are given as per the prevailing tax laws and may vary from time to time in
accordance with amendments to the law or enactments thereto. The information given below lists out the
possible benefits available to the Debenture Holder(s) of an Indian company in which public are substantially
interested1, in a summary manner only and is not a complete analysis or listing of all potential tax consequences
of the subscription, ownership and disposal of the debenture. The Debenture Holder is advised to consider in its own case, the tax implications in respect of subscription to the Debentures after consulting his tax advisor as alternate views are possible. We are not liable to the Debenture Holder in any manner for placing reliance upon the contents of this statement of tax benefits.
A. IMPLICATIONS UNDER THE INCOME-TAX ACT, 1961 (‘I.T. ACT’)
I. To the Resident Debenture Holder
1. Interest on NCD received by Debenture Holder(s) would be subject to tax at the normal rates of tax in
accordance with and subject to the provisions of the I.T. Act and such tax would need to be withheld at the time of credit/payment as per the provisions of Section 193 of the I.T. Act. However, no income tax is deductible at source in respect of the following:
(a) On any security issued by a company in a dematerialized form and is listed on recognized stock
exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 and the
rules made there under.(w.e.f. 01.06.2008).
(b) In case the payment of interest on debentures to a resident individual or a Hindu Undivided
Family (‘HUF’) Debenture Holder does not or is not likely to exceed Rs 5,000 in the aggregate
during the Financial Year and the interest is paid by an account payee cheque.
(c) When the Assessing Officer issues a certificate on an application by a Debenture Holder on satisfaction that the total income of the Debenture Holder justifies no/lower deduction of tax at source as per the provisions of Section 197(1) of the I.T. Act; and that certificate is filed with the Company before the prescribed date of closure of books for payment of debenture interest.
(d) (i) When the resident Debenture Holder with Permanent Account Number (‘PAN’) (not being a company or a firm) submits a declaration as per the provisions of section 197A(1A) of the I.T. Act in the prescribed Form 15G verified in the prescribed manner to the effect that the tax on his estimated total income of the financial year in which such income is to be included in computing his total income will be NIL. However under section 197A(1B) of the I.T. Act, “Form 15G cannot be submitted nor considered for exemption from tax deduction at source if the dividend income referred to in section 194, interest on securities, interest, withdrawal from NSS and income from units of mutual fund or of Unit Trust of India as the case may be or the aggregate of the amounts of such incomes credited or paid or likely to be credited or paid during the previous year in which such income is to be included exceeds the maximum amount which is not chargeable to income tax”.
To illustrate, as on 01.04.2016 -
the maximum amount of income not chargeable to tax in case of individuals (other than senior citizens and super senior citizens) and HUFs is Rs 2,50,000;
in the case of every individual being a resident in India, who is of the age of 60 years or more but less than 80 years at any time during the Financial year (Senior Citizen) is Rs 3,00,000; and
in the case of every individual being a resident in India, who is of the age of 80 years or more at any time during the Financial year (Super Senior Citizen) is Rs 5,00,000 for Financial Year
1Refer Section 2(18)(b)(B) of the I.T. Act.
47
2016-17.
Further, section 87A provides a rebate of 100 percent of income-tax or an amount of Rs 5,000 whichever is less to a resident individual whose total income does not exceed Rs 500,000
(ii) Senior citizens, who are 60 or more years of age at any time during the financial year, enjoy the special privilege to submit a self-declaration in the prescribed Form 15H for non deduction of tax at source in accordance with the provisions of section 197A(1C) of the I.T. Act even if the aggregate income credited or paid or likely to be credited or paid exceeds the maximum amount not chargeable to tax, provided that the tax due on total income of the person is NIL.
(iii) In all other situations, tax would be deducted at source as per prevailing provisions of the I.T. Act. Form No.15G with PAN / Form No.15H with PAN / Certificate issued u/s 197(1) has to be filed with the Company before the prescribed date of closure of books for payment of debenture interest without any tax withholding.
2. In case where tax has to be deducted at source while paying debenture interest, the Company is not
required to deduct surcharge, education cess and secondary and higher education cess.
3. As per the provisions of section 2(29A) of the IT Act, read with section 2(42A) of the I.T. Act, a listed debenture is treated as a long term capital asset if the same is held for more than 12 months immediately preceding the date of its transfer. As per section 112 of the I.T. Act, capital gains arising on the transfer of long term capital assets being listed securities are subject to tax at the rate of 20% of capital gains calculated after reducing indexed cost of acquisition or 10% of capital gains without indexation of the cost of acquisition. The capital gains will be computed by deducting expenditure incurred in connection with such transfer and cost of acquisition/indexed cost of acquisition of the debentures from the sale consideration.
However as per the third proviso to section 48 of I.T. Act, benefit of indexation of cost of acquisition under second proviso of section 48 of I.T. Act, is not available in case of bonds and debenture, except capital indexed bonds issued by the Government. Accordingly, long term capital gains arising to the Debenture Holder(s), would be subject to tax at the rate of 10%, computed without indexation, as the benefit of indexation of cost of acquisition is not available in case of debentures.
In case of an individual or HUF, being a resident, where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such long-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such long-term capital gains shall be computed at the rate mentioned above.
4. Short-term capital gains on the transfer of listed debentures, where debentures are held for a period of not more than 12 months would be taxed at the normal rates of tax in accordance with and subject to the provisions of the I.T. Act. The provisions relating to maximum amount not chargeable to tax described at para 3 above would also apply to such short term capital gains.
5. In case the debentures are held as stock in trade, the income on transfer of debentures would be taxed
as business income or loss in accordance with and subject to the provisions of the I.T. Act. Further, where the debentures are sold by the Debenture Holder(s) before maturity, the gains arising therefrom are generally treated as capital gains or business income, as the case may be. However, there is an exposure that the Indian Revenue Authorities (especially at lower level) may seek to challenge the said characterisation (especially considering the provisions explained in Para V below) and hold such gains/income as interest income in the hands of such Debenture Holder(s). Further, cumulative or regular returns on debentures held till maturity would generally be taxable as interest income taxable under the head Income from other sources where debentures are held as investments or business income where debentures are held as trading asset / stock in trade.
6. As per Section 74 of the I.T. Act, short-term capital loss suffered during the year is allowed to be set-
off against short-term as well as long-term capital gains of the said year. Balance loss, if any could be
carried forward for eight years for claiming set-off against subsequent years’ short-term as well as
long-term capital gains. Long-term capital loss [other than the long-term capital assets whose gains are
exempt under Section 10(38) of the I.T. Act] suffered during the year is allowed to be set-off only
48
against long-term capital gains. Balance loss, if any, could be carried forward for eight years for
claiming set-off against subsequent year’s long-term capital gains.
II. To the Non Resident Debenture Holder
1. A Non-Resident Indian has an option to be governed by Chapter XII-A of the I.T. Act, subject to the
provisions contained therein which are given in brief as under:
(a) Under section 115E of the I.T. Act, interest income from debentures acquired or purchased with or subscribed to in convertible foreign exchange will be taxable at 20%, whereas, long term capital gains on transfer of such Debentures will be taxable at 10% of such capital gains without indexation of cost of acquisition. Short-term capital gains will be taxable at the normal rates of tax in accordance with and subject to the provisions contained therein.
(b) Under section 115F of the I.T. Act, long term capital gains arising to a non-resident Indian from transfer of debentures acquired or purchased with or subscribed to in convertible foreign exchange will be exempt from capital gain tax if the net consideration is invested within six months after the date of transfer of the debentures in any specified asset or in any saving certificates referred to in section 10(4B) of the I.T. Act in accordance with and subject to the provisions contained therein.
(c) Under section 115G of the I.T. Act, it shall not be necessary for a non-resident Indian to file a return of income under section 139(1) of the I.T. Act, if his total income consists only of investment income as defined under section 115C and/or long term capital gains earned on transfer of such investment acquired out of convertible foreign exchange, and the tax has been deducted at source from such income under the provisions of Chapter XVII-B of the I.T. Act in accordance with and subject to the provisions contained therein.
(d) Under section 115H of the I.T. Act, where a non-resident Indian becomes a resident in India in any subsequent year, he may furnish to the Assessing Officer a declaration in writing along with return of income under section 139 for the assessment year for which he is assessable as a resident, to the effect that the provisions of Chapter XII-A shall continue to apply to him in relation to the investment income (other than on shares in an Indian Company) derived from any foreign exchange assets in accordance with and subject to the provisions contained therein. On doing so, the provisions of Chapter XII-A shall continue to apply to him in relation to such income for that assessment year and for every subsequent assessment year until the transfer or conversion (otherwise than by transfer) into money of such assets.
2. In accordance with and subject to the provisions of section 115I of the I.T. Act, a Non-Resident Indian
may opt not to be governed by the provisions of Chapter XII-A of the I.T. Act. In that case,
(a) Long term capital gains on transfer of listed debentures would be subject to tax at the rate of 10%
computed without indexation.
(b) Investment income and Short-term capital gains on the transfer of listed debentures, where
debentures are held for a period of not more than 12 months preceding the date of transfer, would be taxed at the normal rates of tax in accordance with and subject to the provisions of the I.T. Act
3. Under Section 195 of the I.T. Act, the applicable rate of tax deduction at source is 20% on investment
income and 10% on any long-term capital gains as per section 115E, and normal tax rates for Short Term Capital Gains if the payee Debenture Holder is a Non Resident Indian.
4. As per Section 74 of the I.T. Act, short-term capital loss suffered during the year is allowed to be set-
off against short-term as well as long-term capital gains of the said year. Balance loss, if any could be
carried forward for eight years for claiming set-off against subsequent years’ short-term as well as
long-term capital gains. Long-term capital loss suffered (other than the long-term capital assets whose
gains are exempt under Section 10(38) of the I.T. Act) during the year is allowed to be set-off only
against long-term capital gains. Balance loss, if any, could be carried forward for eight years for
claiming set-off against subsequent year’s long-term capital gains.
49
5. The income tax deducted shall be increased by a surcharge as under:
(a) In the case of non-resident Indian surcharge at the rate of 15 % of such tax where the income or
the aggregate of such income paid or likely to be paid and subject to the deduction exceeds
Rs. 1,00,00,000.
(b) In case of foreign companies, where the income paid or likely to be paid exceeds Rs. 1,00,00,000
but does not exceed Rs. 10,00,00,000 a surcharge of 2% of such tax liability is payable and when
such income paid or likely to be paid exceeds Rs. 10,00,00,000, surcharge at 5% of such tax is
payable.
Further, 2% education cess and 1% secondary and higher education cess on the total income tax
(including surcharge) is also deductible.
6. As per section 90(2) of the I.T. Act read with the Circular no. 728 dated October 30, 1995 issued by
the Central Board of Direct Taxes (‘CBDT’), in the case of a remittance to a country with which a Double Taxation Avoidance Agreement (DTAA) is in force, the tax should be deducted at the rate provided in the I.T. Act or at the rate provided in the DTAA, whichever is more beneficial to the assessee. However, submission of Tax Residency Certificate (‘TRC’) is a mandatory condition for availing benefits under any DTAA. Further, such non-resident investor would also be required to furnish Form 10F alongwith TRC, if such TRC does not contain information prescribed by the CBDT vide its Notification No. 57/2013 dated 1 August 2013.
7. Alternatively, to ensure non deduction or lower deduction of tax at source, as the case may be, the
Debenture Holder should furnish a certificate under section 197(1) of the I.T. Act, from the Assessing
Officer before the prescribed date of closure of books for payment of debenture interest. However, an
application for the issuance of such certificate would not be entertained in the absence of PAN as per
the provisions of section 206AA of the I.T. Act.
8. Where, debentures are held as stock in trade, the income on transfer of debentures would be taxed as
business income or loss in accordance with and subject to the provisions of the I.T. Act. Further,
where the debentures are sold by the Debenture Holder(s) before maturity, the gains arising therefrom
are generally treated as capital gains or business income, as the case may be. However, there is an
exposure that the Indian Revenue Authorities (especially at lower level) may seek to challenge the said
characterisation (especially considering the provisions explained in Para V below) and hold such
gains/income as interest income in the hands of such Debenture Holder(s). Further, cumulative or
regular returns on debentures held till maturity would generally be taxable as interest income taxable
under the head Income from other sources where debentures are held as investments or business
income where debentures are held as trading asset / stock in trade.
III. To the Foreign Institutional Investors (FIIs)
1. As per Section 2(14) of the I.T. Act, any securities held by FIIs which has invested in such securities in
accordance with the regulations made under the Securities and Exchange Board of India Act, 1992,
shall be treated as capital assets. Accordingly, any gains arising from transfer of such securities shall
be chargeable to tax in the hands of FIIs as capital gains.
2. In accordance with and subject to the provisions of section 115AD of the I.T. Act, long term capital
gains on transfer of debentures by FIIs are taxable at 10% (plus applicable surcharge and education and
secondary and higher education cess) and short-term capital gains are taxable at 30% (plus applicable
surcharge and education and secondary and higher education cess). The benefit of cost indexation will
not be available. Further, benefit of provisions of the first proviso of section 48 of the I.T. Act will not
apply.
3. Income other than capital gains arising out of debentures is taxable at 20% in accordance with and
subject to the provisions of Section 115AD.
50
4. Section 194LD in the I.T. Act provides for lower rate of withholding tax at the rate of 5% on payment
by way of interest paid by an Indian company to FIIs and Qualified Foreign Investor in respect of rupee
denominated bond of an Indian company between June 1, 2013 and June 1, 2017 provided such rate
does not exceed the rate as may be notified2 by the Government.
5. In accordance with and subject to the provisions of section 196D(2) of the I.T. Act, no deduction of tax
at source is applicable in respect of capital gains arising on the transfer of debentures by FIIs.
6. The CBDT has issued a Notification No. 9 dated 22 January 2014 which provides that Foreign
Portfolio Investors (FPI) registered under SEBI (Foreign Portfolio Investors) Regulations, 2014 shall
be treated as FII for the purpose of Section 115AD of the I.T. Act.
7. The provisions at para II (4, 5, 6 and 7) above would also apply to FIIs.
IV. To the Other Eligible Institutions
All mutual funds registered under Securities and Exchange Board of India or set up by public sector banks or public financial institutions or authorised by the Reserve Bank of India are exempt from tax on all their income, including income from investment in Debentures under the provisions of Section 10(23D) of the I.T. Act subject to and in accordance with the provisions contained therein. Further, as per the provisions of section 196 of the I.T. Act, no deduction of tax shall be made by any person from any sums payable to mutual funds specified under Section 10(23D) of the I.T. Act, where such sum is payable to it by way of interest or dividend in respect of any securities or shares owned by it or in which it has full beneficial interest, or any other income accruing or arising to it.
V. General Anti-Avoidance Rule (‘GAAR)
In terms of Chapter XA of the I.T. Act, General Anti-Avoidance Rule may be invoked notwithstanding
anything contained in the I.T. Act. By this Rule, any arrangement entered into by an assessee where
the main purpose of the arrangement is to obtain a tax benefit may be declared to be
impermissible avoidance arrangement as defined in that Chapter and the consequence would be
interalia denial of tax benefit, applicable w.e.f FY 2017-18. The GAAR provisions can be said to be
not applicable in certain circumstances viz. where the main purpose of arrangement is not to obtain a
tax benefit etc. including circumstances enumerated in CBDT Notification No. 75/2013 dated 23
September 2013.
VI. Exemption under Sections 54EC and 54F of the I.T. Act
1. Under section 54EC of the I.T .Act, long term capital gains arising to the Debenture Holder(s) on transfer of their debentures in the company shall not be chargeable to tax to the extent such capital gains are invested in certain notified bonds within six months after the date of transfer. If only part of the capital gain is so invested, the exemption shall be proportionately reduced. However, if the said notified bonds are transferred or converted into money within a period of three years from their date of acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term capital gains in the year in which the bonds are transferred or converted into money. However, the amount of exemption with respect to the investment made in the aforesaid notified bonds during the financial year in which the debentures are transferred and the subsequent financial year, should not exceed Rs. 50 lacs. Where the benefit of section 54EC of the I.T. Act has been availed of on investments in the notified bonds, a deduction from the income with reference to such cost shall not be allowed under section 80C of the I.T. Act.
2. As per the provisions of section 54F of the I.T. Act, any long-term capital gains on transfer of a long
term capital asset (not being residential house) arising to a Debenture Holder who is an individual or Hindu Undivided Family, is exempt from tax if the entire net sales consideration is utilized, within a
period of one year before, or two years after the date of transfer, in purchase of a new residential house, or for construction of a residential house within three years from the date of transfer. If part of such net sales consideration is invested within the prescribed period in a residential house, then such gains
2Refer Notification No. 56/2013 [F.No.149/81/2013-TPL]/SO 2311(E), dated 29-7-2013. As per the said Notification, in case of bonds
issued on or after the 1st day of July, 2010, the rate of interest shall not exceed500 basis points (bps) over the Base Rate of State Bank of India applicable on the date of issue of the said bonds.
51
would be chargeable to tax on a proportionate basis. This exemption is available, subject to the condition that the Debenture Holder does not own more than
one residential house at the time of such transfer. If the residential house in which the investment has been made is transferred within a period of three years from the date of its purchase or construction, the amount of capital gains tax exempted earlier would become chargeable to tax as long term capital gains in the year in which such residential house is transferred. Similarly, if the Debenture Holder purchases
within a period of two years or constructs within a period of three years after the date of transfer of capital asset, another residential house (other than the new residential house referred above), then the original exemption will be taxed as capital gains in the year in which the additional residential house is acquired.
3. As per provisions of Section 54EE inserted by the Finance Act 2016, long term capital gains arising to
the Debenture Holder(s) on transfer of their debentures in the company shall not be chargeable to tax to
the extent such capital gains are invested in certain notified units within six months after the date of
transfer. If only part of the capital gain is so invested, the exemption shall be proportionately reduced.
However, if the said notified units are transferred within a period of three years from their date of
acquisition, the amount of capital gains exempted earlier would become chargeable to tax as long term
capital gains in the year in which the units are transferred. Further, in case where loan or advance on
the security of such notified units is availed, such notified units shall be deemed to have been
transferred on the date on which loan or advance is taken. However, the amount of exemption with
respect to the investment made in the aforesaid notified units during the financial year in which the
debentures are transferred and the subsequent financial year, should not exceed Rs. 50 lacs.
VII. Requirement to furnish PAN under the I.T. Act 1. Sec.139A(5A)
Section 139A(5A) requires every person from whose income tax has been deducted at source under chapter XVII-B of the I.T. Act to furnish his PAN to the person responsible for deduction of tax at source.
2. Sec.206AA
(a) Section 206AA of the I.T. Act requires every person entitled to receive any sum, on which tax is
deductible under Chapter XVIIB (‘deductee’) to furnish his PAN to the deductor, failing which tax shall be deducted at the highest of the following rates:
(i) at the rate specified in the relevant provision of the I.T. Act; or (ii) at the rate or rates in force; or (iii) at the rate of twenty per cent.
(b) A declaration under Section 197A(1) or 197A(1A) or 197A(1C) shall not be valid unless the
person furnishes his PAN in such declaration and the deductor is required to deduct tax as per Para (a) above in such a case.
(c) Where a wrong PAN is provided, it will be regarded as non furnishing of PAN and Para (a) above
will apply apart from penal consequences.
(d) As per the Finance Act 2016, with effect from June 1 2016, the provisions of section 206AA shall
not apply to a non-resident, not being a company, or to a foreign company, in respect of:
(i) Payment of interest on long-term bonds as referred to in section 194LC; and
(ii) any other payment subject to such conditions as may be prescribed (these conditions are yet to be
prescribed).
VIII. Taxability of Gifts received for nil or inadequate consideration
As per section 56(2)(vii) of the I.T. Act, where an Individual or Hindu Undivided Family receives
debentures from any person on or after 1st October, 2009:
52
(i) without any consideration, aggregate fair market value of which exceeds fifty thousand rupees,
then the whole of the aggregate fair market value of such debentures or;
(ii) for a consideration which is less than the aggregate fair market value of the debenture by an
amount exceeding fifty thousand rupees, then the aggregate fair market value of such debentures
as exceeds such consideration;
shall be taxable as the income of the recipient at the normal rates of tax
However, this provision would not apply to any receipt:
(a) From any relative; or
(b) On the occasion of the marriage of the individual; or
(c) Under a will or by way of inheritance; or
(d) In contemplation of death of the payer or donor, as the case may be; or
(e) From any local authority as defined in Section 10(20) of the I.T. Act; or
(f) From any fund or foundation or university or other educational institution or hospital or other
medical institution or any trust or institution referred to in Section 10(23C); or
(g) From any trust or institution registered under section 12AA.
IX. Where the Debenture Holder is a person located in a Notified Jurisdictional Area (‘NJA’) under
section 94A of the I.T. Act
Where the Debenture Holder is a person located in a NJA [at present, Cyprus has been notified3 as
NJA], as per the provisions of section 94A of the I.T. Act -
All parties to such transactions shall be treated as associated enterprises under section 92A of the
I.T. Act and the transaction shall be treated as an international transaction resulting in application
of transfer pricing regulations including maintenance of documentations, benchmarking, etc.
No deduction in respect of any payment made to any financial institution in a NJA shall be allowed
under the I.T. Act unless the assessee furnishes an authorisation in the prescribed form authorizing
the CBDT or any other income-tax authority acting on its behalf to seek relevant information from
the said financial institution [Section 94A(3)(a) read with Rule 21AC and Form 10FC].
No deduction in respect of any expenditure or allowance (including depreciation) arising from the
transaction with a person located in a NJA shall be allowed under the I. T. Act unless the assessee
maintains such documents and furnishes such information as may be prescribed [Section 94A(3)(b)
read with Rule 21AC].
If any assessee receives any sum from any person located in a NJA, then the onus is on the
assessee to satisfactorily explain the source of such money in the hands of such person or in the
hands of the beneficial owner, and in case of his failure to do so, the amount shall be deemed to be
the income of the assessee [Section 94A(4)].
Any sum payable to a person located in a NJA shall be liable for withholding tax at the highest of
the following rates:
(i) at the rate or rates in force;
(ii) at the rate specified in the relevant provision of the I.T. Act; or
(iii) at the rate of thirty per cent. at the rate or rates in force Notes
1. The above statement sets out the provisions of law in a summary manner only and is not a complete
analysis or listing of all potential tax consequences of the purchase, ownership and disposal of debentures/bonds.
3Notification No. 86/2013, dated 1 November, 2013 published in Official Gazette through SO 4625 GI/13
53
2. The above statement covers only certain relevant benefits under the Income-tax Act, 1961 and does not cover benefits under any other law.
3. The above statement of possible tax benefits is as per the current direct tax laws relevant for the
Assessment Year 2017-18 (considering the amendments made by Finance Act, 2016)..
4. Further, several of these benefits are dependent on the Debenture Holder fulfilling the conditions prescribed under the relevant provisions.
5. This statement is intended only to provide general information to the Debenture Holder(s) and is
neither designed nor intended to be a substitute for professional tax advice. In view of the individual nature of tax consequences, each Debenture Holder is advised to consult his/her/its own tax advisor with respect to specific tax consequences of his/her/its holding in the debentures of the Company.
6. The stated benefits will be available only to the sole/ first named holder in case the debenture is held
by joint holders.
7. In respect of non-residents, the tax rates and consequent taxation mentioned above will be further
subject to any benefits available under the relevant tax treaty, if any, between India and the country in which the non-resident has fiscal domicile.
8. In respect of non-residents, taxes paid in India could be claimed as a credit in accordance with the
provisions of the relevant tax treaty.
9. Interest on application money would be subject to tax at the normal rates of tax in accordance with and
subject to the provisions of the I.T. Act and such tax would need to be withheld at the time of
credit/payment as per the provisions of Section 194A of the I.T. Act.
10. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing provisions of law and its interpretation, which are subject to changes from time to time. We do not assume responsibility to update the views consequent to such changes. We shall not be liable to any claims, liabilities or expenses relating to this assignment except to the extent of fees relating to this assignment, as finally judicially determined to have resulted primarily from bad faith or intentional misconduct. We will not be liable to any other person in respect of this statement.
54
SECTION IV - ABOUT OUR COMPANY
INDUSTRY
The information in this section has not been independently verified by us, the Lead Managers, or any of our or
their respective affiliates or advisors. The information may not be consistent with other information compiled by
third parties within or outside India. Industry sources and publications generally state that the information
contained therein has been obtained from sources it believes to be reliable, but their accuracy, completeness
and underlying assumptions are not guaranteed and their reliability cannot be assured. Industry and
Government publications are also prepared based on information as of specific dates and may no longer be
current or reflect current trends. Industry and Government sources and publications may also base their
information on estimates, forecasts and assumptions which may prove to be incorrect. Accordingly, investment
decisions should not be based on such information. Figures used in this section are presented as in the original
sources and have not been adjusted, restated or rounded-off for presentation in the Prospectus
GLOBAL ECONOMY
Global growth, currently estimated at 3.1 percent in 2015, is projected at 3.4 percent in 2016 and 3.6 percent in
2017. The pickup in global activity is projected to be more gradual than in the October 2015 World Economic
Outlook (WEO), especially in emerging market and developing economies.
In advanced economies, a modest and uneven recovery is expected to continue, with a gradual further narrowing
of output gaps. The picture for emerging market and developing economies is diverse but in many cases
challenging. The slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in
some large emerging market economies will continue to weigh on growth prospects in 2016–17. The projected
pickup in growth in the next two years— despite the ongoing slowdown in China—primarily reflects forecasts
of a gradual improvement of growth rates in countries currently in economic distress, notably Brazil, Russia,
and some countries in the Middle East, though even this projected partial recovery could be frustrated by new
economic or political shocks.
Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global
economy: a generalized slowdown in emerging market economies, China’s rebalancing, lower commodity
prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States. If
these key challenges are not successfully managed, global growth could be derailed.
In 2015, global economic activity remained subdued. Growth in emerging market and developing economies—
while still accounting for over 70 percent of global growth—declined for the fifth consecutive year, while a
modest recovery continued in advanced economies. Three key transitions continue to influence the global
outlook: (1) the gradual slowdown and rebalancing of economic activity in China away from investment and
manufacturing toward consumption and services, (2) lower prices for energy and other commodities, and (3) a
gradual tightening in monetary policy in the United States in the context of a resilient U.S. recovery as several
other major advanced economy central banks continue to ease monetary policy.
Global growth is projected at 3.4 percent in 2016 and 3.6 percent in 2017. Overall, forecasts for global growth
have been revised downward by 0.2 percentage point for both 2016 and 2017. These revisions reflect to a
substantial degree, but not exclusively, a weaker pickup in emerging economies than was forecast in October. In
terms of the country composition, the revisions are largely accounted for by Brazil, where the recession caused
by political uncertainty amid continued fallout from the Petrobras investigation is proving to be deeper and more
protracted than previously expected; the Middle East, where prospects are hurt by lower oil prices; and the
United States, where growth momentum is now expected to hold steady rather than gather further steam.
Prospects for global trade growth have also been marked down by more than ½ percentage point for 2016 and
2017, reflecting developments in China as well as distressed economies.
and collateral management for agri commodities and , life insurance. We believe EFSL’s diversified service
platform allows us to leverage relationships across various lines of businesses, thereby increasing our ability for
repeat business and cross selling our products and benefits from customer reference.
Edelweiss group enjoys a large client base of over 8,87,000 clients from retail and wholesale segments across its
various businesses. Edelweiss has 237 offices in 122 cities in India including nine offices outside India. We
believe that the success of the Edelweiss Group as a provider of financial services is largely built upon the
ability to nurture and maintain client relationships which helps our Company to get new business as well as
continuation of existing business from the satisfied clients. We believe that the Edelweiss brand is well
recognized and associated with trust, governance and compliance structure, liquid balance sheet, high quality
customer centric services, creative solutions to strategic and financial challenges and sound execution of clients’
transactions. Among the many award and accolades received by the Edelweiss Group, few of the prominent
ones are being adjudged a “Business Superbrand 2010/11”, being voted India's Best Midcap Company by
readers of Finance Asia and being awarded the 'Best Corporate Governance, India, 2013 as well as 2016 from
the London, UK, based Capital Finance International jury. We believe that being part of the Edelweiss group
significantly enhances our ability to attract new clients. We believe that the brand value and scale of the
business operations of the Edelweiss Group provides us with an advantage in an increasingly competitive
market. We intend to continue to leverage the brand value of the Edelweiss Group to grow our business.
We draw upon a range of resources from the Edelweiss group such as information technology and infrastructure.
We leverage Edelweiss groups experience in the various facets of the financial services sector which allows us
KHAITAN & CO | DRAFT FOR DISCUSSION [INSERT DATE]
100%
77.60%
22.40%
Edelweiss Financial Services
Limited (EFSL)
Edelweiss Housing
Finance Limited
Edelweiss Commodities
Services Limited
)
70
to understand market trends and mechanics and helps us in designing our products to suit the requirements of
our target customer base as well as to address opportunities that arise out of changes in market trends. We
believe that by leveraging on the existing relationships and synergies with the Edelweiss group we will be able
to further expand the size of our loan book, launch new products and build scale. We further believe that the
relationships that Edelweiss Group has developed provides us with opportunities for cross selling our products
through customer reference.
Access to range of cost effective funding sources
Our fund requirements are currently predominantly sourced through credit facilities from banks and issue of
redeemable non-convertible debentures on a private placement basis. We have accessed funds from NHB and a
number of credit providers, including nationalized banks and private Indian banks. We believe that we have
developed stable long term relationships with our lenders and have established a track record of timely servicing
of our debts. We also access money market borrowings.
We believe that we have been able to achieve a relatively stable cost of funds despite the difficult conditions in
the global and Indian economy and the resultant reduced liquidity and an increase in interest rates, primarily due
to effective treasury management and innovative fund raising programs. We believe we are able to borrow from
a range of sources at competitive rates.
Set forth below is our Average Cost of Borrowing for the last five fiscal years.
Year FY 2016 FY 2015 FY 2014 FY 2013 FY 2012
Average Cost of
Borrowing 10.57% 11.01% 11.14% 11.68% 10.32%
Well Defined Processes
We believe our business processes ensure complete independence of function and segregation of responsibilities.
We believe our credit appraisal and credit control processes, centralized operations unit, independent audit unit
for checking compliance with the prescribed policies and approving all loans at transaction level and risk
management processes and policies provide for multiple checks and verifications for both legal and technical
parameters, including collateral valuation and title search, document verification and fraud and K Y C check,
and personal meetings with clients. Further our processes have been standardized with the objective of
providing high levels of service quality while maintaining process and time efficiency. This is done by
facilitating the integration of workforce, processes and technology. Our key business processes are regularly
monitored by the business/operations head and risk head.
Our loan approval and administration procedures, collection and enforcement procedures are designed to
minimize delinquencies and maximize recoveries. We believe our procedures have ensured that the eventual
write off due to non – recovery was ` 0.55 million since incorporation.
We have a well-defined risk management policy framework for risk identification, assessment, and control to
effectively manage risks associated with the various business activities. The risk function is mainly looked after
by a Business Risk Group embedded in the business. As the second line of defense, Edelweiss group has created
a Global Risk Group that is responsible for managing the risk arising out of various business activities at a
central level.We seek to monitor and control risk exposure through a variety of separate but complementary
financial, credit and operational reporting systems.
Experienced Management Team
We have an experienced management team, which is supported by a capable and motivated pool of employees.
Our senior managers have diverse experience in various functions, related to our business. Our senior managers
have an in-depth understanding of the specific industry, products and geographic regions they cover, which
enables them to appropriately support and provide guidance to our employees. We also have an in-house
experienced legal team consisting of qualified professionals, well-equipped to handle all our legal requirements
ranging from loan and security documentation to recovery, repossession, security enforcement and related
litigation, if any. Our in-house legal team is also assisted by empaneled lawyers and technical vendors. We
believe that the extensive relevant experience and financial acumen of our management and executives provides
71
us with a distinct competitive advantage. Our Board, including the independent directors, also has extensive
experience in the financial services and banking industries in India.
Technology, Analytics and Credit bureau usage
We believe that our robust loan management system, analytic ability and extensive usage of the credit bureau
and other allied KYC procedures offers us a significant competitive advantage. Our systems have the capability
of end to end customer data capture, computation of income, collateral data capture, and repayment
management. Our loan approval is controlled by the loan application system. We believe our monthly analytics
reports including through–the-door and credit–information tracking are efficient tools for ensuring risk
management-controls & compliance.
Our systems are custom designed for our services and help us reduce people contact time and enhance our
processes and operational excellence. Our systems fully integrate businesses in every aspect bringing together
various departments in simple transitions and customer information updates. Technology gives us the ability to
integrate cash flows in real time and allows us better informed decision making with easy access to record and
information.
OUR STRATEGIES
Our key strategic priorities are as follows:
Retail Focus
We are focused on high growth, dispersed risk- retail lending. We seek to further increase our presence in small
ticket home loans by utilizing the extensive branch network of the Edelweiss group. This retail business is
intended to provide scale & diversify the risk across geographies, industries & collaterals.
Minimize concentration risk by diversifying the Product Portfolio and expanding our customer base
We intend to further improve the diversity of our product portfolio to cater to the various financial needs of our
customers.
Beyond our existing loan products, we intend to leverage our brand and office network, develop complementary
business lines and become the preferred provider of home loans, in tier 2 and tier 3 towns.
Our diverse revenue stream will reduce our dependence on any particular product line thus enabling us to spread
and mitigate our risk exposure to any particular industry, business, geography or customer segment. Offering a
wide range of products helps us attract more customers thereby increasing our scale of operations. We intend to
grow the share of our disbursements to home loans, loans against property and construction finance to capture
market share in what we believe is a growth area and improve the diversity of our loan exposure.
We intend to launch a marketing initiative to target our existing and former customers to cater to all their
financing requirements, thus generating new business and diversifying our loan portfolio. We expect that
complementary business lines will allow us to offer new products to existing customers while attracting new
customers as well. We will continue to focus on growing our rural portfolio through our service providers which
we believe is in a unique position to cater to a large and untapped customer base. We expect that our knowledge
of local markets will allow us to diversify into products desired by our customers, differentiating us from our
competitors.
Optimizing return while maintaining the quality of loan book
We believe that we have implemented credit and risk management systems which we intend to rely upon to
optimize our product mix in our loan portfolios. We believe that this will also help us in maintaining our
margins in a volatile interest rate scenario.
Improve our credit ratings to optimize cost of funds
We fund our capital requirements through a variety of sources, including credit facilities from banks, NHB and
issuance of money market instruments. For details of our credit ratings, as of March 31, 2016, please see section
titled “Our Business”, on page 67.
72
We believe that we have been able to achieve relatively stable and competitive cost of funds from a range of
sources, primarily due to our credit ratings and the goodwill associated with the Edelweiss brand name. During
the past three years, we have focused on improving our assets liability management by ensuring that we align
our liabilities profile in sync with assets profile. As the assets profile is longer duration, our liability mix
includes long term borrowings from banks and shorter term borrowing form debt markets/money markets. We
have also increased long term market borrowing by placement of NCDs. We have also diversified our sources of
borrowing by obtaining credit facility from a number of banks besides MFs and NHB. Based on our
increasingly strong balance sheet, we believe that we will be able to further improve our credit ratings, and tap
newer sources of funds.
Continue to Attract and Retain Talented Employees
As part of our business strategy, we are focused on attracting and retaining high quality talent. We recognize
that the success of our business depends on our employees, particularly as we continue to expand our operations.
We have successfully recruited and retained talented employees from a variety of backgrounds, including credit
evaluation, risk management, treasury, technology and marketing. We will continue to attract talented
employees through our retention initiatives and recruitment from colleges. Our retention initiatives include job
rotation, half yearly reviews, stock options of our Promoter EFSL, performance based incentive, employee
recognition programs, training at our training facilities and on-the-job training. We invest a significant amount
of time and resources for training our employees, which we believe fosters mutual trust, improves the quality of
our customer service and puts further emphasis on our continued retention.
Achieve operations excellence by further strengthening our operating processes and risk management
systems
We are focused on building a process driven organization with a culture of compliance, audit and risk
management. Operations excellence and risk management forms an integral part of our business as we are
exposed to various risks. The objective of our risk management systems is to measure and monitor the various
risks we are subject to and to implement policies and procedures to address such risks. We intend to continue to
improve our operating processes and risk management systems that will further enhance our ability to manage
the risks inherent to our business.
The objective of our risk management systems is to measure and monitor the various risks, we are subject to and
to implement policies and procedures to address such risks. Furthermore, we intend to continue to train existing
and new employees in appraisal skills, customer relations, communication skills to improve customer centricity
and risk management procedures to enable replication of talent and ensures smooth transition on employee
attrition, update our employees with latest developments to mitigate risks against frauds and cheating.
OUR PRODUCTS
Our loan book stood at ` 23,872.67 million and ` 15,087.30 million as on March 31, 2016 and March 31, 2015
respectively as compared to ` 11,552.17 million and ` 7,018.69 million as on March 31, 2014 and March 31,
2013 respectively.
The following chart illustrates the loan book attributable to each product line, as on March 31, 2016:
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A. Home Loans
As on March 31, 2016 and March 31, 2015 our Home loans accounted for 38% and 53% respectively
of the loan book. Home loans are majorly offered to (1) salaried individuals (2) self-employed
individuals (3) professionals and (4) corporates. The home loans are provided for purchase of existing
property, purchase of plot for construction thereon, self-construction of new property and extension or
renovation of existing residential property. The loans are secured by the mortgage of the
property/house for which the loan is provided. The tenure of the loans generally ranges upto 25 years.
B. Loan against Property (“LAP”)
As on March 31, 2016 and March 31, 2015 our Loan against Property accounted for 26% and 39%
respectively of the loan book. Loan against Property (“LAP”) is a loan facility majorly offered to self-
employed individuals, businesses requiring funds for business purposes or for the purchase of
commercial property or for investment in assets against mortgage of residential / commercial property.
As a part of LAP, lease rental discounting is also offered where the lessee is a large corporate. The
funds so raised are utilized for meeting business needs. The tenure of the loans generally ranges upto 15
years.
C. Construction Finance
As on March 31, 2016 and March 31, 2015 our Construction Finance accounted for 20% and 8%
respectively of the loan book. Construction finance is a loan facility offered to real estate developers
towards the cost of the construction of the project. The financing is usually against real estate collateral
and/or other collateral. The loan disbursements are construction linked. The tenure of the loans
generally ranges upto 5 years.
D. Rural finance
As on March 31, 2016 and March 31, 2015 our Rural Finance accounted for 16% and 0% respectively
of the loan book. Rural finance is a loan facility offered to individuals in the Tier-V and Tier-VI towns
for joint lending group. The Company has entered into an arrangement with certain service providers
which undertake the sourcing of the rural finance loans as per the product & criteria agreed and fixed
with them. These service providers are interalia also responsible for disbursements, collections and
other operations i.e. the entire life cycle management of these loans. The financing is usually unsecured.
The tenure of the loans generally ranges upto 2 years and the average ticket size of these loans is
approximately `15,000, with repayments received on weekly/ fortnightly/ monthly basis.
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BRANCH NETWORK
Our branch network as of March 31, 2016 is as follows
PROCESSES
Customer Evaluation, Credit Appraisal and Disbursement
Our Credit Policies
All loans are sanctioned under the credit risk policy approved by our internal risk management committee.
Emphasis is applied on demonstrated past and future assessment of income, repayment capacity and credit
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history prior to approving any loan. We undertake periodic update of credit policies based on regulatory changes,
portfolio performance and development.
Loan Origination
We source all potential customers through Direct Sales Agents (DSAs), Direct Sales Teams (DSTs) or through
our experienced and well trained sourcing teams or internal channels sourcing through Edelweiss Group
companies. The channel partners undergo a detailed evaluation process covering their experience, past
performance, market standing and distribution business model before empanelment with us.
Loan Management Technology Platform
Our Company uses “FinnOne” – an integrated lending system that spans from origination to the life of the loan
across all functions. The application provides a seamless flow of the deal through its various stages of
processing and maintains all records and audit trails besides generating various reports.
Evaluation
We undertake various credit control checks and due diligence on a prospective customer which inter-alia
includes an internal data de-duplication check, credit bureau check, fraud verification, asset verification and
valuation, and other legal and technical verification procedures. After having completed our internal verification
procedures all documents submitted by the prospective customer are checked and verified as required.
All applications once logged into FinnOne are evaluated on various parameters. Based on the demographic,
financial and business information provided, internal and external checks are performed by the system
automatically which includes not limited to de-duplication with the existing database to find possible matches
with the existing customer list, automated generation of credit bureau reports to check customers’ past credit
history with all lenders, contact point verification, valuation of the collateral, legal and technical evaluation of
proposed collaterals by empanelled agencies. Similar due diligence is also carried out in respect of guarantors, if
any. We conduct various diligence procedures in connection with the collateral/security for such loans which
include review and verification of the relevant ownership documents and obtain title reports as applicable.
Reports from these checks along with detailed analysis of financial statements, tax challans, bank statements and
other documents put together constitute the credit file for all customers. These files are reviewed by the credit
managers for evaluation. Based on the document review the credit managers conduct personal discussions with
the customers at their workplace. The discussion is intended to gather information about the business model of
the customer, his positioning in the value chain, dependence of suppliers and/or customers and to ascertain any
business risks like export dependence, raw-material supplies, etc. which might adversely impact the business
cash flows and hence diminish repayment capacity.
Based on the all the information gathered, and assessment of customer’s business risks, debt servicing ability
and collateral risks, the credit manager puts the transaction proposal to appropriate approving authority in the
hierarchy for decision.
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Credit Appraisal
Our basic credit appraisal process broadly follows the following flow chart:
Approval and Disbursement Process
Once the credit history, credentials, information and documents have been submitted by the prospective
customer and verified to our satisfaction, the applications are approved at the appropriate credit approval level.
There are various levels of approvals which a proposal can be put to which are based on loan product, loan
amount and identified risks.
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With due sanctioning of the loan, we execute agreements in connection with the loan and creation of security in
relation thereto, if any, with the customer. The disbursing officer retains evidence of the applicant’s acceptance
of the terms and conditions of the loan as part of the loan documentation.
Prior to the loan disbursement, our concerned officer ensures that a Know Your Customer, (“KYC”), checklist
is completed by the applicant. The concerned officer verifies such information provided and includes the records
in the relevant loan file. The officer is also required to ensure that the contents of the loan documents are
explained in detail to the customer either in English or in the local language of the customer and a statement to
such effect is included as part of the loan documentation. The customer is provided with a copy of the loan
documents executed by him.
Loan administration and monitoring
The customer (and guarantor, if any) execute(s) the security creation documents and the loan agreement setting
out the terms of the loan. A loan repayment schedule is attached as a schedule to the loan agreement, which
generally sets out periodical repayment terms. Repayments are made in periodical installments. Loans disbursed
are recovered from the customer in accordance with the loan terms and conditions agreed with the customer. We
track loan repayment schedules of our customers on a monthly basis, based on the outstanding tenure of the
loans, the number of installments due and defaults committed, if any. This data is analyzed based on the loans
disbursed and location of the customer. All recovery of amounts due on loans is managed internally by us. Our
feet-on-street officials ensure complete focus on all stages of the collections process.
Our employees reviews collections regularly and personally contact customers that have defaulted on their loan
payments.
Our employees are assisted by the feet-on-street officers, who are also responsible for the collection of
installments from each customer serviced by them. We believe that close monitoring of debt servicing efficiency
enables us to maintain high recovery ratios and maintain satisfactory asset quality.
Portfolio Management, Collection and Recovery Processes
We manage the portfolio management and collection processes, in-house. We have on-roll collection personnel
to ensure timely collection of dues. We also utilise our sales personnel for collection of payment.
Further, for effective recovery management, all early delinquent customers are managed by a dedicated team
which undertakes methodical customer visits and personal telephone calls for recovery of dues. In cases where
customers are unable to make payments and move to higher delinquency levels, a specified team of collection
officers are deployed who manage deep delinquent accounts. In addition to customer visits, this team utilises
available legal tools for attachment of properties, for re-payment of dues and legal arbitration proceedings.
MARKETING
We source our potential customers through our experienced and well trained sourcing teams or through pre-
approved channel partners. The channel partners undergo a detailed evaluation process covering their
experience, past performance, market standing and distribution business model before empanelment with us.
Further there is also cross selling of loan products to clients having an existing relationship with other lines of
business of Edelweiss Group. We monitor their performance periodically for adherence to processes prescribed
for them for customer sourcing. In addition, Edelweiss group carries out advertising campaigns with TV ads,
print ads and road shows to increase the visibility of the Edelweiss brand and our Company, which in turn helps
in acquisition of customers for our Company. Further we also carry out loan camps and local advertising in tier
2 cities which helps in enhancing brand awareness and also helps in building a loyal customer franchise by
providing a direct interface opportunity with our branch employees.
NPA
We believe we follow risk management policies to ensure that the asset quality of our credit book remains
comfortable. Gross non-performing loans were 1.17% and 0.75% of total loans as on March 31, 2016 and March
31, 2015, compared to 0.06% and 0.00% of total loans as on March 31, 2014 and March 31, 2013 respectively.
The net NPA ratio is 0.83% and 0.60% as on March 31, 2016 and March 31, 2015 compared to 0.05% and 0.00%
as on March 31, 2014 and March 31, 2013.
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The NPA details are as under:
(` In million)
Particulars
At the end of period March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31,
2016
Loan book 4,776.16 7,018.70 11,552.17 15,087.30 23,872.67
Gross NPLs 0.00 0.00 6.63 112.68 279.22
Gross NPLs %* 0.00% 0.00% 0.06% 0.75% 1.17%
Provision Held for
Non-Performing
Loans
0.00 0.00 0.99 22.19 82.13
Net NPLs** 0.00 0.00 5.64 90.49 197.09
Net NPLs %*** 0.00% 0.00% 0.05% 0.60% 0.83%
NPL Provision
Cover****
0.00% 0.00% 14.93% 19.69% 29.41%
Standard Asset
Provision Held
20.67 29.74 53.19 75.75 142.62
*Gross NPL % = Gross NPL / loan book **Net NPLs = Gross NPLs (-) provision held for non performing loan ***Net NPLs % = (Gross NPLs - provision held for non performing loan) / loan book ****NPL provision cover = Provision held for non performing loan / Gross NPLs
FUNDING SOURCES
We raise funds from diversified sources and through a wide range of instruments in order to reduce our funding
cost and to have a diversified lender base. This helps us to raise resources at the most competitive rates, protect
interest margins and maintain a diversified funding portfolio that enable us to achieve funding stability and
liquidity. Our sources of funding comprise of credit facilities from banks, redeemable non-convertible
debentures, money market borrowings and assignment of certain loan portfolios.
BORROWINGS
Please refer to the sections titled “Financial Statements” and “Financial Indebtedness” on pages 116 and 118.
CREDIT RATING
Rating details of our Company as on March 31, 2016
(` in million)
Sr.No. Rating Agency Instrument Rating Amount (` in
million)
Date of
rating
1. CARE Non-Convertible
Debentures
CARE AA
(SO)
[Double
A(Structured
Obligation]
2,500 April 26,
2016
Non-Convertible
Debentures
CARE AA
[Double A]
2,000 May 31,
2016
Retail Non-Convertible
Debentures
CARE AA
[Double A]
5,000 May 31,
2016
Subordinated Debt CARE AA 1,000 April 26,
2016
Bank Facilities CARE
AA[Double
A]
13,500 October 1,
2015
Commercial Paper CARE A1+ 5,000 April 26,
2016
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Sr.No. Rating Agency Instrument Rating Amount (` in
million)
Date of
rating
2. ICRA Limited Non-Convertible
Debentures
[ICRA] AA 5,000 June 3, 2016
Retail Non-Convertible
Debentures
[ICRA] AA 5,000 June 14,
2016
Subordinated Debt [ICRA] AA 1,000 June 3, 2016
Bank Facilities [ICRA] AA 17,000 June 10,
2016
Commercial Paper [ICRA] A1+ 10,000 June 3, 2016
3. Brickwork
Non-Convertible
Debentures
BWR AA+ 2,500 June 1, 2016
Retail Non-Convertible
Debentures
BWR AA+ 5,000 June 1, 2016
4. CRISIL Ratings Limited Commercial Paper CRISIL A1+ 7,500 May 6, 2016
Bank Facilities CRISIL AA-
/ Positive
8,350 June 17,
2015
TREASURY OPERATIONS
Our treasury operations are mainly focused on meeting our funding requirements. Our sources of funding
comprise of credit facilities from banks and issuance of money market instruments. We believe that through our
treasury operations we are able to maintain our ability to repay borrowings as they mature and obtain new loans
at competitive rates. Our treasury department undertakes liquidity management by seeking to maintain an
optimum level of liquidity and complying with the NHB requirements of asset liability management. The
objective is to ensure smooth functioning of all our operations and at the same time avoid the holding of
excessive cash. We actively manage our cash and funds flow using various cash management services provided
by banks. Our investments, if any, are made in accordance with the investment policy approved by the Board.
CAPITAL ADEQUACY
We are subject to capital adequacy ratio (“CAR”) requirements prescribed by NHB. We are currently required
to maintain a minimum of 12 % as prescribed under the Prudential Norms of NHB based on our total capital to
risk weighted assets. As part of our governance policy, we maintain capital adequacy higher than statutorily
prescribed CAR.
The following table sets out our capital adequacy ratios computed on the basis of applicable NHB requirements
as of the dates indicated:
Particulars as on March 31, 2012 March 31,
2013 March 31, 2014
March
31, 2015
March
31, 2016
CAR prescribed by NHB 12.00% 12.00% 12.00% 12.00% 12.00%
Total Capital Adequacy Ratio 13.37% 13.60% 20.07%@ 29.13% 19.40%
Out of which:
Tier I 13.37% 13.19% 19.48% 24.47% 16.21%
Tier II 0.00% 0.42% 0.59% 4.67% 3.19% @ The CAR as on March 31, 2014 is revised, after giving due impact in terms of NHB letter no.
NHB(ND)/HFC/DRS/Sup./11426/2015 dated November 24, 2015
RISK MANAGEMENT POLICY
We have a well-defined risk management policy framework for risk identification, assessment, and control to
effectively manage risks associated with the various business activities. The risk function is mainly looked after
by a Business Risk Group embedded in the business. As the second line of defense, Edelweiss group has created
a Global Risk Group that is responsible for managing the risk arising out of various business activities at a
central level.
We extend loans to clients by way of Home loans, LAP, Construction Finance and Rural Finance. The lending
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norms followed by the company are conservative. Our average loan-to-value (LTV) ratio is usually around 50
per cent.
ASSET AND LIABILITY MANAGEMENT (“ALCO”)
We require sizeable working capital and hence day-to-day liquidity management becomes a critical function. In
addition, as our Home Loan and LAP book scales up, the asset side duration lengthens requiring greater
attention to management of liabilities. Our treasury team along with the Balance Sheet Management Unit
(“BMU”) at a centralized level, manages Edelweiss Group's liquidity, while also managing the balance sheet
and ensuring that maturing liabilities are repaid smoothly. It also manages key components of balance sheet,
monitors interest rate sensitivity in our portfolio and takes preemptive steps to mitigate any potential liquidity
and interest rate risks.
The Asset Liability Management Committee of our Company was constituted on November 2, 2010. The ALM
statement of our Company is prepared on a monthly basis to track the inflows and outflows in the relevant
buckets. The ALM statement is placed before our Asset Liability Management Committee (ALCO) on a
periodical basis. Since the company has a mixed lending portfolio comprising of short term and long term loans,
efforts are made to match the maturity of liabilities with those of the assets and minimise the ALM mismatch.
CUSTOMER CENTRICITY
The customer is the main reason for the growth of a services oriented company, like that of ours. While most
companies would believe that they are customer oriented, the degree of focus on customers' experience and the
centricity that customers enjoyed in their approach varies.
As we increase our concentration on the retail function of our business, we believe that customer centricity is
going to be the key driver of our business.
CORPORATE SOCIAL RESPONSIBILITY
Edelweiss Group’s Corporate Social Responsibilities are carried out through EdelGive Foundation which is the
philanthropic arm of the Edelweiss Group. Edelgive undertakes CSR activities in a centralized manner for
Edelweiss Group. EdelGive’s mission is to leverage its resources with a view to empowering social
entrepreneurs and organisations towards achieving systemic change. Through the EdelGive Foundation, the
Edelweiss Group including us, financially support worthy non-profits and social entrepreneurs, plan, review and
manage our portfolio of non-profits and social entrepreneurs. Equip philanthropists with investment advice
customised for the non-profit sector, analyze outcomes of philanthropic investments and monitor both individual
programme milestones as well as their broader social impact.
COMPETITION
Our competitors include public sector banks, private sector banks and foreign banks, housing finance companies,
and NBFCs.
INSURANCE COVERAGE
Various types of insurance covers are taken at a centralized level covering all the subsidiaries in the Edelweiss
Group. We are also covered under such insurance policies. We believe that we have necessary and adequate
general insurance for burglary, employee fidelity, Directors and Officers Liability insurance.
INTELLECTUAL PROPERTY
Our Company is using the following trade mark/ Logo pursuant to a trademarks license agreement dated
February 1, 2016, entered into between our Company and Edelweiss Financial Services Limited:
EMPLOYEES
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We believe that our human capital is one of our most important strengths and is the driver of growth, efficiency
and productivity and thus invest in developing our talent and leadership through various initiatives.
We have launched initiatives aimed at strengthening the ability of our managers to bring together people,
strategies, and execution to drive business results. We also have a Leadership Program with the objective of
multiplying leadership capability, growing internal leaders and providing for seamless execution of
organisation's growth target in future. The three tiered Edelweiss Leadership Pool (ELP) at the centralized level
in the Edelweiss Group, consisting of ~8% of the organisation employee base, comprises of Senior Leaders (SL),
Business Leaders (BL) and Emerging Leaders (EL), each of whom undergo a structured Engagement,
Communication and Development (ECD) programme in the span of their membership period. A number of our
employees form a part of these groups.
The number of employees in our Company is as under:
As on No of employees
March 31, 2014 127
March 31, 2015 198
March 31, 2016 304
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HISTORY MAIN OBJECTS AND KEY AGREEMENTS
Brief background of our Company
Our Company was originally incorporated on May 30, 2008 as a public limited company under the provisions of
the Companies Act, 1956 as Edelweiss Housing Finance Limited and received a certificate of incorporation
dated May 30, 2008 and a certificate of commencement of business on June 12, 2008. The Corporate
Identification Number of our Company is U65922MH2008PLC182906.
Our Company has obtained a Certificate of Registration dated March 18, 2010 bearing registration no.
03.0081.10 issued by the National Housing Bank, to commence/carry on the business of a housing finance
institution without accepting public deposits subject to the conditions mentioned in the Certificate of
Registration under Section 29A of the National Housing Bank Act, 1987.
Our Company does not have any subsidiary company.
Change in Registered Office of our Company
The registered office of our Company at Edelweiss House, Off C.S.T. Road, Kalina, Mumbai – 400098 was
shifted from 14th Floor, Express Towers, Nariman Point, Mumbai-400021 with effect from April 15, 2011.
Main Objects of our Company
The main objects of our Company as contained in our Memorandum of Association are:
To provide financial assistance, with or without interest, (with or without security) for any maturity, in any form
whatsoever, to any person or persons (whether individuals, firms, companies, bodies corporate, public body or
authority, supreme, local or otherwise or other entities), whether in the private or public sector, to purchase or
acquire houses, buildings, offices, godown, warehouses, flats or to purchase any freehold or leasehold or any
lands, estate or interest in or to take a demise for any term or terms of years of any land and property or to
construct, erect, improve, extend, alter, renovate, develop or repair any house or building or any form of real
estate or any part or portion thereof or by means of leasing, giving on hire or hire-purchase, lending, selling,
reselling, or otherwise disposing of all forms of immovable and movable properties and assets of any kind,
nature of user, whatsoever and for the purpose, purchasing or otherwise acquiring dominion over the same,
whether new or used and whether engaged in the construction of residential houses, flats, for the purpose of
construction of such residential houses, flats, including the acquisition and development of lands for the
construction of such houses or flats and to private or public sectors engaged in the manufacture of building
materials as well as construction equipment and machinery.
Key Milestones and Major Events
Financial Year Particulars
2009-10 Obtained a certificate of registration dated March 18, 2010 bearing registration no.
03.0081.10 issued by the National Housing Bank, to commence/carry on the business of a
housing finance institution without accepting public deposits subject to the conditions
mentioned in the Certificate of Registration under Section 29A of the National Housing
Bank Act, 1987.
2010-11 Started operations of the Company
The loan book of our Company was ` 1,053.42 million as on March 31, 2011
2012-13 The loan book of our Company was ` 7,018.69 million as on March 31, 2013
First issuance of secured NCDs, amounting to ` 1,500 million, through private placement.
2013-14 The loan book of our Company was ` 11,552.17 million as on March 31, 2014
2014-15 The loan book of our Company was ` 15,087.30 million as on March 31, 2015
First issuance of unsecured NCDs (qualifying as Tier II capital), amounting to ` 500
million, through private placement.
2015-16 The loan book of our Company was ` 23,872.67 million as on March 31, 2016
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Assignment of Receivables
Pursuant to the terms of deed of assignment executed between IDBI Trusteeship Services Ltd (“ITSL”)
and our Company (“Deed of Assignment”), our Company has transferred/ assigned, with effect
from February 20, 2014, pool of receivables relating to mortgage loans amounting to ` 67.32 million (the
“Receivables”) together with all right, title, benefit, interest, powers, risk and guarantees and indemnities, if
any, in relation thereto, under the relevant loan documents, to a trust for the benefit of the beneficiaries,
with the trust to issue to such beneficiaries pass through certificates evidencing their interest in the assets.
Our Company has entered into a Servicer Agreement (“Agreement”), pursuant to which, our Company is
appointed as a Servicer in relation to the assets originated by our Company and to inter alia manage, collect
and recieve payments of the Recievables, hold mortgage security interest. Our Company has executed a
power of attorney in favor of ITSL to appoint them as attorney, on behalf of our Company, to ensure
performance of the provisions of the Deed of Assignment.
Pursuant to the terms of Assignment Agreement executed between Bank of India (“BOI”) and our
Company (“Assignment Agreement”), our Company has unconditionally and irrevocably sold, assigned,
transferred and released, with effect from October 22, 2014, pool of receivables relating to mortgage loans
amounting to ` 1,302.11 million (the “Receivables”) together with rights and interest under the relevant
loan documents excluding the security interest over the secured properties. Our Company has entered into a
Collection & Servicing Agency Agreement (“Agreement”), pursuant to which, our Company is appointed
as a Collection & Servicing Agent in relation to Recievables and to inter alia manage, collect and recieve
payments of underlying recievables, hold mortgage security interest. Our Company has executed a power of
attorney in favor of BOI to appoint them as attorney, on behalf of our Company, to ensure performance of
the provisions of the Assignment Agreement.
Pursuant to the terms of Assignment Agreement executed between DCB Bank Limited (“DCB”) and our
Company (“Assignment Agreement”), our Company has unconditionally and irrevocably sold, assigned,
transferred and released, with effect from March 30, 2015, pool of receivables relating to mortgage loans
amounting to ` 355.86 million (the “Receivables”) together with rights and interest under the relevant loan
documents excluding the security interest over the secured properties. Our Company has entered into a
Collection & Servicing Agency Agreement (“Agreement”), pursuant to which, our Company is appointed
as a Collection & Servicing Agent in relation to the Receivables and to inter alia manage, collect and
recieve payments of underlying recievables, hold mortgage security interest. Our Company has executed a
power of attorney in favor of DCB to appoint them as attorney, on behalf of our Company, to ensure
performance of the provisions of the Assignment Agreement.
Pursuant to the terms of Assignment Agreement executed between DCB Bank Limited (“DCB”) and our
Company (“Assignment Agreement”), our Company has unconditionally and irrevocably sold, assigned,
transferred and released, with effect from September 29, 2015 pool of receivables relating to mortgage
loans amounting to `354.02 million (the “Receivables”) together with rights and interest under the relevant
loan documents excluding the security interest over the secured properties. Our Company has entered into a
Collection & Servicing Agency Agreement (“Agreement”), pursuant to which, our Company is appointed
as a Collection & Servicing Agent in relation to the Receivables and to inter alia manage, collect and
recieve payments of underlying recievables, hold mortgage security interest. Our Company has executed a
power of attorney in favor of DCB to appoint them as attorney, on behalf of our Company, to ensure
performance of the provisions of the Assignment Agreement.
Pursuant to the terms of Assignment Agreement executed between DCB Bank Ltd (“DCB”) and our
Company (“Assignment Agreement”), our Company has unconditionally and irrevocably sold, assigned,
transferred and released, with effect from January 29, 2016, pool of receivables relating to mortgage loans
amounting to ` 232.37 million (the “Receivables”) together with rights and interest under the relevant loan
documents excluding the security interest over the secured properties. Our Company has entered into a
Collection & Servicing Agency Agreement (“Agreement”), pursuant to which, our Company is appointed
as a Collection & Servicing Agent in relation to the Receivables and to inter alia manage, collect and
recieve payments of underlying recievables, hold mortgage security interest. Our Company has executed a
power of attorney in favor of DCB to appoint them as attorney, on behalf of our Company, to ensure
performance of the provisions of the Assignment Agreement.
Pursuant to the terms of Deed of Assignment executed between GDA Trusteeship Limited (“GDA”) and
our Company (“Deed of Assignment”), our Company has transferred/ assigned, with effect from March 18,
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2016 pool of unsecured loans amounting to `600.00 million (the “Receivables”) together with all right,
title, benefits and interest, if any, in relation thereto, under the relevant loan documents, to a trust for the
benefit of the beneficiaries and the trust to issue to such beneficiaries pass through certificates evidencing
their interest in the assets. Our Company is also appointed as a Servicer in relation to the assets originated
by our Company and to inter alia collect and deposits the Receivables. Our Company has executed a power
of attorney in favor of GDA to appoint them as attorney, on behalf of our Company, to ensure performance
of the provisions of the Deed of Assignment.
Details of assignment transactions undertaken by the Company since the last 5 years are as follows:
Sr. No Year Transaction Mode (` In million)
Direct Assignment Securitization
1 FY 15-16 586.39 600.00
2 FY 14-15 1,657.97 -
3 FY 13-14 - 67.32
4 FY 12-13 - -
5 FY 11-12 - -
Total 2,244.36 667.32
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REGULATIONS AND POLICIES
The following description is a summary of the relevant regulations and policies as prescribed by the
Government of India and other regulatory bodies that are applicable to our business. Taxation statutes
such as the IT Act, Central Sales Tax Act, 1956 and applicable local sales tax statutes, labour
regulations
such as the Employees State Insurance Act, 1948 and the Employees Provident Fund and Miscellaneous
Act, 1952, and other miscellaneous regulations such as the Trade and Merchandise Marks Act, 1958 and
applicable Shops and Establishments statutes apply to us as they do to any other Indian company and
therefore have not been detailed below. The information detailed below has been obtained from various
legislations, including rules and regulations promulgated by regulatory bodies, and the bye-laws of the
respective local authorities that are available in the public domain. The regulations set out below may not
be exhaustive and are merely intended to provide general information to the investors and are neither
designed nor intended to substitute for professional legal advice. The statements below are based on
the current provisions of Indian law, which are subject to change or modification by subsequent
legislative, regulatory, administrative or judicial decisions.
The National Housing Bank Act, 1987
The National Housing Bank Act, 1987 (the “NHB Act”) was enacted to establish NHB to operate as a
principal agency to promote HFCs both at the local and regional levels and to provide financial and other
support to such institutions for matters connected therewith or incidental thereto. The business of the
NHB, among others, includes promoting, establishing, supporting or aiding in the promotion,
establishment and support of HFCs; making loans and advances or other forms of financial assistance for
housing activities of HFCs, scheduled banks, state co-operative agricultural and rural development
banks or any other institution or class of institutions as may be notified by the Central Government;
guaranteeing the financial obligations of HFCs and underwriting the issue of stocks, shares, debentures
and other securities of HFCs; formulating one or more schemes for the purpose of mobilization of
resources and extension of credit for housing; providing guidelines to the HFCs to ensure their growth on
sound lines; providing technical and administrative assistance to HFCs and exercising all powers and
functions in the performance of duties entrusted to the NHB under the NHB Act or under any other law
for the time being in force.
Under the NHB Act, every HFC is required to obtain a certificate of registration and meet the
requirement of net owned funds of `100 million or such other higher amount as the NHB may specify
for commencing or carrying on the business of HFCs. Further, every HFC is required to invest and
continue to invest in India in unencumbered approved securities, an amount which, at the close of
business on any day, is not less than 5% (or such higher percentage as the NHB may specify, not
exceeding 25%) of the deposits outstanding at the close of business on the last working day of the
second preceding quarter.
Additionally, every HFC is required to maintain in India an account with a scheduled bank in term deposits
or certificate of deposits (free of charge or lien) or in deposits with the NHB or by way of subscription
to the bonds issued by the NHB, or partly in such account or in such deposit or partly by way of such
subscription, a sum which, at the close of business on any day, together with the investment as spec ified
above, shall not be less than 10% (or such higher percentage as the NHB may specify, not exceeding 25%),
of the deposits outstanding in the books of the HFC at the close of business on the last working day of
the second preceding quarter. Pursuant to the NHB Act, every HFC is also required to create a reserve fund
and transfer therein a sum not less than 20% of its net profit every year as disclosed in the profit and loss
account and before any dividend is declared.
Under the terms of the NHB Act the NHB may, and on the direction of the RBI the NHB shall, cause an
inspection of the book of accounts and other documents of any institution to which the NHB has provided
a loan, advance or granted any other financial assistance. Further, the NHB is required to provide a copy of
its report to such an institution. Also, the NHB in order to efficiently discharge its function, is empowered
to direct and collect the credit information from any HFC, at any time.
The Recovery of Debts due to Banks and Financial Institutions Act, 1993
86
The Recovery of Debts due to Banks and Financial Institutions Act, 1993 (the “DRT Act”) provides for
establishment of the Debts Recovery Tribunals (the “DRTs”) for expeditious adjudication and recovery of
debts due to banks and public financial institutions or to a consortium of banks and public financial
institutions. Under the DRT Act, the procedures for recovery of debt have been simplified and time frames
have been fixed for speedy disposal of cases. The DRT Act lays down the rules for establishment of DRTs,
procedure for making application to the DRTs, powers of the DRTs and modes of recovery of debts
determined by DRTs. These include attachment and sale of movable and immovable property of the
defendant, arrest of the defendant and defendant's detention in prison and appointment of receiver for
management of the movable or immovable properties of the defendant.
The DRT Act also provides that a bank or public financial institution having a claim to recover its debt
may join an ongoing proceeding filed by some other bank or public financial institution against its debtor
at any stage of the proceedings before the final order is passed by making an application to the DRT.
The Housing Finance Companies (National Housing Bank) Directions, 2010, as amended
The objectives of the Housing Finance Companies (National Housing Bank) Directions, 2010 (the “NHB
Directions, 2010”) is to consolidate and issue directions in relation to the acceptance of deposits by the
housing finance companies, provide the prudential norms for income recognition, accounting standards,
asset classification, provision for bad and doubtful assets, capital adequacy and concentration of
credit/investment to be observed by the housing finance institutions and the matters to be included in the
auditors' report by the auditors of housing finance institutions.
In accordance with the prudential norms mentioned in the NHB Directions, 2010, income recognition shall
be based on recognized accounting principles. Every HFC shall, after taking into account the degree of
well-defined credit weaknesses and extent of dependence on collateral security for realization, classify its
lease/hire purchase assets, loans and advances and any other forms of credit into certain specified classes,
viz. standard assets, sub-standard assets, doubtful assets and loss assets. Every HFC, after taking into
account the time lag between an account becoming non-performing, its recognition as such, the realization
of the security and the erosion over time in the value of security charged, is required to make provision
against substandard assets, doubtful assets and loss assets as provided under the NHB Directions, 2010.
The NHB has amended the provisioning norms in the NHB Directions, 2010, pursuant to the notification
no. NHB.HFC.DIR.3/CMD/2011 dated August 5, 2011, as further amended by NHB vide notification no.
NHB.HFC.DIR.4/CMD/2012 dated January 19, 2012, as amended by notification no.
NHB.HFC.DIR.9/CMD/2013 dated September 6, 2013 and included in the Master Circular - The Housing
Finance Companies (NHB) Directions, 2010 dated September 9, 2015. The provisioning requirement in
respect of loans, advances and other credit facilities including bills purchased and d iscounted are required
to be:
(a) loss assets - the entire assets are required to be written off. If assets are permitted to remain in the
books for any reason, then 100% of the outstanding should be provided for;
(b) doubtful assets - 100% provision to the extent to which the advance is not covered by the realizable
value of the security to which a HFC has a valid recourse shall be made and in addition, depending
upon the period for which the asset has remained doubtful provision to the extent of 25% to 100%
of the secured portion i.e. the estimated realisable value of the outstanding shall be made in the
following manner: i) 25% up to the period of one year; ii) 40% for the period of one year to three
years and, iii) 100% for the period more than three years;
(c) substandard assets - provision of 15% of the total outstanding should be made; and
(d) standard assets-(i) standard assets with respect to housing loans at teaser/special rates - provision of
2% on the total outstanding amount of such loans and the provisioning of these loans to be re -set
after one year at the applicable rates from the date on which the rates are re -set at higher rates if the
accounts remain standard; (ii) (a) standard assets in respect of Commercial Real Estates Residential
Housing (“CRE-RH”) (consisting of loans to builders/developers for residential housing projects
(except for captive consumption). Such projects do not include non -residential commercial real
estate. However, integrated housing projects comprising of some commercial space (e.g. shopping
complex, school etc.) can be classified as CRE-RH, provided that the commercial space in the
87
residential housing project does not exceed 10% of the total floor space index (“FSI”) of the project.
In case the FSI of the commercial area in a predominantly residential housing complex exceeds the
ceiling of the project loans, the entire loan should be classified as CRE (and not CRE -RH) -
provision of 0.75% on the total outstanding amount of such loans; (ii) (b) standard assets in respect
of all other Commercial Real Estates (“CRE”) (consisting of loans to builders/developers/others for
Details of Shares which remain unclaimed may be given hear along with details such as number of shareholders, outstanding shares held in demat/unclaimed suspense
account, voting rights which are frozen etc.
Note: (1) PAN would not be displayed on website of Stock Exchange(s)
(2) The term 'Encumbrance' has the same meaning as assigned under regulation 28(3) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
107
Table III - Statement showing shareholding pattern of the Public shareholder
Cate
gory
Category &
Name of the
shareholders
PAN
Nos. of
sharehol
ders
No. of fully
paid up
equity
shares held
No. of
Partly
paid-
up
equity
shares
held
No. of
shares
underlyi
ng
Deposit
ory
Receipts
Total nos.
shares held
Sharehold
ing%
calculated
as per
SCRR,
1957As a
% of
(A+B+C2)
Number of Voting Rights held in each class of securities
Details of the shareholders acting as persons in Concert including their Shareholding (No. and %):
Note:
1. PAN would not be displayed on website of Stock Exchange(s).
2. The above format needs to be disclosed along with the name of following persons:Institutions/Non Institutions holding more than 1% of total number of shares
3. W.r.t. the information pertaining to Depository Receipts, the same may be disclosed in the respective columns to the extent information available and the balance to
be disclosed as held by custodian.
112
Table IV - Statement showing shareholding pattern of the Non Promoter- Non Public shareholder
a. Reconciliation of shares at the beginning and at the end of the reporting period :
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
No of shares No of shares No of shares No of shares No of shares
Equity shares ( no. of shares)
Outstanding at the beginning of the year 49.35 37.85 29.35 26.85 22.85
Issued during the year - 11.50 8.50 2.50 4.00
Outstanding at the end of the year 49.35 49.35 37.85 29.35 26.85
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
Amount Amount Amount Amount Amount
Equity shares ( in amount)
Outstanding at the beginning of the year 493.50 378.50 293.50 268.50 228.50
Issued during the year - 115.00 85.00 25.00 40.00
Outstanding at the end of the year 493.50 493.50 378.50 293.50 268.50
b. Rights, Preferences and restrictions attached to each class of shares including restrictions on the distribution of dividend and repayment of capital :
c. Shares in the Company held by each shareholder holding more than 5% shares specifying the number of shares held:
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
No. of shares No. of shares No. of shares No. of shares No. of shares
Equity share of Rs. 10 each fully paid-up:
Edelweiss Commodities Services Limited, the holding Company
Add : Additions during the year - 1,035.00 765.00 225.00 360.00
Less: Provision for premium payable on redemption of debentures 105.72 110.09 - - -
(A) 2,275.19 2,380.91 1,456.00 691.00 466.00
Statutory Reserve (refer note 2.2 A)
Opening Balance 59.42 17.21 7.73 0.14 0.14
Add : Additions during the year 76.43 42.21 9.48 7.59 -
Closing Balance (B) 135.85 59.42 17.21 7.73 0.14
Surplus (Profit & Loss balance)
Opening balance in Statement of Profit and Loss 175.53 6.74 (31.20) (61.55) (16.95)
Add: Profit/(Loss) for the year 382.14 211.04 47.42 37.94 (44.60)
Less: Adjustment on account of accumulated depreciation
(net of tax) (refer note 2.10*) - 0.04 - - -
557.67 217.74 16.22 (23.61) (61.55)
Housing Bank Act, 1987 76.43 42.21 9.48 7.59 -
Closing balance in the Statement of Profit and Loss (C) 481.24 175.53 6.74 (31.20) (61.55)
(A+B+C) 2,892.28 2,615.86 1,479.95 667.53 404.59
The Company has only one class of equity shares having a par value of Rs. 10. Each holder of equity shares is entitled to one vote. In the event of liquidation of
the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts.
Less: Transfer to statutory reserve under section 29C of The National
F-14
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
2.2A
Disclosure in accordance with the circular no. NHB CND/DRS/Pol. Circular.61/2013-14 dated April 7, 2014 issued by the National Housing Bank.
As at 31 March
2016
As at 31 March
2015
As at 31 March
2014
As at 31 March
2013
As at 31 March
2012
Balance at the beginning of the year Amount Amount Amount Amount Amount
a) Statutory Reserve u/s 29C of the National Housing Bank Act, 1987 25.70 17.21 7.73 0.14 0.14
b) Amount of special reserve u/s 36(1)(vii) of Income Tax Act, 1961taken into
account for the purposes of Statutory Reserve under section 29C of the NHB Act,
1987
33.72 - - - -
c) Total 59.42 17.21 7.73 0.14 0.14
Addition/Appropriation/Withdrawal during the year
Add : a) Amount transferred u/s 29C of the NHB Act, 1987 3.11 8.49 9.48 7.59 -
b) Amount of special reserve u/s 36(1)(vii) of Income Tax Act, 1961 taken into
account for the purposes of Statutory Reserve under section 29C of the NHB Act,
1987
73.32 33.72 - - -
Less : a)
Amount appropriated from the Statutory Reserve u/s 29C of the NHB Act, 1987- - - - -
b) Amount withdrawn from the Special Reserve u/s 36(1)(viii) of Income Tax Act,
1961 which has been taken into account for the purpose of provision u/ s 29C of
the NHB Act, 1987
- - - - -
Balance at the end of the year
a) Statutory Reserve u/s 29C of the National Housing Bank Act, 1987 28.81 25.70 17.21 7.73 0.14
b) Amount of special reserve u/s 36(1)(vii) of Income Tax Act, 1961taken into
account for the purposes of Statutory Reserve under section 29C of the NHB Act,
1987
107.04 33.72 - - -
c) Total 135.85 59.42 17.21 7.73 0.14
Particulars
As per Section 29C of the The National Housing Bank Act, 1987 (the “NHB Act”), the Company is required to transfer at least 20% of its net profits every year to a reserve before any
dividend is declared. For this purpose any Special Reserve created by the Company under Section 36(1)(viii) of the Income- tax Act, is considered to be an eligible transfer. The Company
has transferred an amount of Rs. 73.32 million as at 31st March 2016, Rs. 33.72 million as at 31st March 2015 to Special Reserve No. II in terms of Section 36(1)(viii) of the Income-tax
Act, 1961 and an amount of Rs. 3.11 million as at 31st March 2016, Rs. 8.49 million as at 31st March 2015, Rs. 9.49 million as at 31st March 2014, Rs. 7.59 milliiion as at 31st March
2013 to “Statutory Reserve (As per Section 29C of The NHB Act)”.
F-15
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
Long Term borrowings 1,090.00 3,520.00 2,900.00 1,500.00 -
* These NCDs are Zero Coupon Debentures issued at par and redeemable at premium.
** The debentures are secured by way of pari passu charge on an immovable property and an exclusive charge on standard loan assets to the extent of 110% of the outstanding
amount of the debentures.
Repayment terms of Secured Non-convertible Debentures are as follow.
Description of Secured Redeemable
Non Convertible Debentures
(NCD)
Of which Current maturities have been classified under other Current
Liabilities (Refer Note No. 2.8)
The debentures are secured by way of pari passu charge on an immovable property and standard loan assets to the extent of 100% of the outstanding amount of the debentures,
unless otherwise stated.
Note : Coupon rate of "NCDs" outstanding as on 31 March 2016 varies from 10.00% to 11.75%; 31 March 2015 varies from 10.00% to 11.75%; 31 March 2014 varies from 11% to
11.75%.
F-16
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
2.3B
Term loan from banks - Secured
Current
maturities
Rate of interest <1 year 1-3 years 3-5 years after 5 years
Note : Coupon rate of "NCDs" outstanding as on 31 March 2016 and 31 March 2015 is 11.25%.
Description of Unsecured
Redeemable Non Convertible
Debentures (NCD)
As at 31 March 2015
Repayment terms of term loan from banks are as follow.
As at 31 March 2016
Long Term MaturitiesTOTAL
Long Term MaturitiesTOTAL
Nature of security and terms of repayment for secured borrowings (other than debentures):
As at 31 March 2014
Long Term MaturitiesTOTAL
The loan is taken at an interest rate of Base Rate + 1.35% and repayable in 8 equal quarterly installments after the moratorium
period of 12 months starting from 11 March 2012.
As at 31 March 2013
Long Term MaturitiesTOTAL
As at 31 March 2012
Term loan from banks - Secured by pari passu first charge on current and future housing loans and other receivables of the
Company.
All secured long term borrowings are secured by way of hypothecation of receivables i.e. loans and advances and corporate guarantee from the ultimate holding Company and/or
holding Company.
All secured long term borrowings are secured by way of hypothecation of receivables i.e. loans and advances and corporate guarantee from the ultimate holding Company and/or
holding Company.
Long Term MaturitiesTOTAL
Nature of security and terms of repayment for secured borrowings (other than debentures):
As at 31 March 2016
Term loan from National Housing Bank - Secured
Long Term MaturitiesTOTAL
As at 31 March 2015
Term loan from National Housing Bank - Secured
Repayment terms of term loan from National Housing Bank are as follow.
F-17
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)
(Currency : Indian rupees in millions) Annexure IV
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
2.4 OTHER LONG-TERM LIABILITIES
Interest accrued but not due on borrowings 182.33 173.51 - - -
Contingent provision against standard assets (Refer Note No. 2.5A) 71.55 51.40 40.21 21.11 20.11
Provision for non performing assets (Refer Note No. 2.5A) 77.83 21.19 0.96 - -
Provision for Deferred Bonus - 6.69 - - -
Others 2.00 4.66 1.61 2.37 -
157.81 88.03 44.27 24.62 21.30
2.5A
Provisions for standard assets and non performing assets
Standard AssetsSub-Standard
AssetsDoubtful Assets Loss Assets
Housing
Current 33.69 0.78 1.13 1.84
Non Current 33.92 18.73 12.58 37.83
67.61 19.51 13.71 39.67
Non Housing
Current 37.38 0.46 0.08 -
Non Current 37.63 7.63 1.06 -
75.01 8.09 1.14 -
Standard AssetsSub-Standard
AssetsDoubtful Assets Loss Assets
Housing
Current 12.90 0.63 0.26 0.05
Non Current 27.25 13.82 3.77 2.15
40.15 14.45 4.03 2.20
Non Housing
Current 11.44 0.07 - -
Non Current 24.15 1.45 - -
35.59 1.52 - -
Standard AssetsSub-Standard
AssetsDoubtful Assets Loss Assets
Housing
Current 8.20 0.02 - -
Non Current 25.41 0.67 - -
33.61 0.69 - -
Non Housing
Current 4.78 0.01 - -
Non Current 14.80 0.29 - -
19.58 0.30 - -
As at 31 March 2014
Particulars
Provision for
As at 31 March 2015
Particulars
Provision for
As at 31 March 2016
Particulars
Provision for
A general provision of 0.40% of total outstanding amount of Loans where collateral is residential property, a general provision of 0.75% of total outstanding amount of
builder loans and general provision of 1.00% of total outstanding amount of loans where collateral is commercial property, which are classified as standard assets has been
made as per NHB’s Direction No. NHB.(ND)/DRS/Pol.No.45/ dated 19th January 2012 & NHB.HFC.DIR.9/CMD/2013 dated 6th September 2013.
F-18
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)
(Currency : Indian rupees in millions) Annexure IV
Provisions for standard assets and non performing assets (Continued)
Standard AssetsSub-Standard
AssetsDoubtful Assets Loss Assets
Housing
Current 6.36 - - -
Non Current 14.93 - - -
21.29 - - -
Non Housing
Current 2.27 - - -
Non Current 6.18 - - -
8.45 - - -
Standard AssetsSub-Standard
AssetsDoubtful Assets Loss Assets
Housing
Current 0.43 - - -
Non Current 17.63 - - -
18.06 - - -
Non Housing
Current 0.13 - - -
Non Current 2.48 - - -
2.61 - - -
As at 31 March 2012
Particulars
Provision for
As at 31 March 2013
Particulars
Provision for
F-19
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
As at 31 March 2016 - 2.70 1.36 5.61 2.47 14.89 27.02 29.60 56.62
Intangible
Assets
Land Leasehold
improvements
Furniture &
fixtures Vehicles
Office
equipment Computers
Computer
Software
Net Block
As at 31 March 2012 - 0.13 0.12 4.94 0.64 2.46 8.29 12.37 20.66
As at 31 March 2013 1.21 0.54 - 3.66 0.87 2.64 8.93 13.38 22.31
As at 31 March 2014 1.21 0.65 0.49 2.71 1.03 3.65 9.74 6.88 16.62
As at 31 March 2015 1.21 2.70 1.96 3.24 1.09 7.80 18.01 6.17 24.18
As at 31 March 2016 1.21 6.35 3.70 3.77 2.80 8.19 26.02 3.88 29.90
*
Particulars Tangible Assets
Total
Tangible
Asset
Total Fixed
Assets
As per the requirement of the Companies Act, 2013, the Company has evaluated the useful lives of its fixed assets and has computed depreciation according to the
provisions of Schedule II of the Act. Consequently, in the profit and loss statement of the Company, the depreciation charge for the last year ended 31 March 2015 was
higher by Rs. 0.04 million had been charged to the opening balance of the retained earnings in respect of assets whose remaining useful life had expired as at 1 April
2014.
Particulars
Tangible Assets Total
Tangible
Asset
Total Fixed
Assets
Particulars
Tangible Assets Total
Tangible
Asset
Total Fixed
Assets
F-22
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
2.11 DEFERRED TAX ASSETS
Deferred tax assets on account of :-
Difference between book and tax depreciation 0.46 - - - -
Disallowances under section 43B of the Income Tax Act, 1961 5.34 3.99 0.51 - -
Amortisation of loan processing fees 46.02 29.19 20.52 11.39 -
Unabsorbed depreciation and business losses - - - 0.12 -
Any other item - - - 0.35 -
Provision for Non Performing Assets 28.43 7.68 17.26 9.65 -
Total (A) 80.25 40.86 38.29 21.51 -
Deferred tax liabilities on account of :-
Difference between book and tax depreciation - 0.54 1.20 1.92 -
Amortisation of loan origination cost 30.57 28.86 23.54 15.18 -
Special Reserve u/s 36(1) (viii) 25.38 11.46 - - -
Total (B) 55.95 40.86 24.74 17.10 -
Net Deferred tax assets (A-B) 24.30 (0.00) 13.55 4.41 -
**** Required disclosure of special reserves
2.12 LONG-TERM LOANS AND ADVANCES - LOANS
Secured
(Considered good unless otherwise stated)
Loans to borrowers
Housing (Refer Note 2.12A)
Standard Assets 9,956.85 6,207.17 5,801.11 3,732.88 4,655.89
Sub-standard Assets 124.88 92.53 4.49 - -
Doubtful Assets 47.79 3.77 - - -
Loss Assets 37.83 2.14 - - -
(A) 10,167.35 6,305.61 5,805.60 3,732.88 4,655.89
Non housing
Standard Assets 609.63 3,923.36 2,924.71 1,240.61 -
Bank deposits with more than 12 months maturity, held as
margin money or security against borrowings, guarantees 31.20 31.20 10.60 - -
Accrued interest on fixed deposits 2.69 1.54 - - -
33.89 32.74 10.60 - -
The housing loan referred to in note 2.12 & 2.17 also includes an amount of Rs. 184.65 million as on 31 March 2016; Rs. 148.14 million as on 31 March 2015
being life insurance premium paid to the insurer.
F-23
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
2.14 CURRENT INVESTMENTS :
Face
ValueQuantity Amount
Face
ValueQuantity Amount
Face
ValueQuantity Amount
Face
ValueQuantity Amount
Face
ValueQuantity Amount
Investments in mutual funds :
ICICI Prudential Flexible Income - Direct Plan - Growth - - - 10 948,620 250.00 - - - - - - - - -
Total - - 948,620 250.00 - - - - - - - - -
As at
31 March 2013
As at
31 March 2012
As at As at As at
31 March 2016 31 March 2015 31 March 2014
F-24
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
2.15 TRADE RECEIVABLES
Other debts
Unsecured, considered good from related parties (Refer Note No.
2.26 (ii)) 85.78 43.35 46.76 85.95 42.91
85.78 43.35 46.76 85.95 42.91
2.16 CASH AND BANK BALANCES
Cash and cash equivalents
Cash in hand 0.04 0.01 0.01 - -
Balances with banks
in current accounts 37.02 290.77 336.20 155.46 30.95
37.06 290.78 336.21 155.46 30.95
In deposit accounts with original maturity less than one year
Short term deposit with bank 19.44 19.44 19.44 18.70 -
56.50 310.22 355.65 174.16 30.95
F-25
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities (Continued)(Currency : Indian rupees in millions) Annexure IV
As at As at As at As at As at
31 March 2016 31 March 2015 31 March 2014 31 March 2013 31 March 2012
2.17 SHORT-TERM LOANS AND ADVANCES - LOANS
Secured
(Considered good unless otherwise stated)
Loan to borrowers
Loans to borrowers
Housing (Refer Note 2.17A)
Standard Assets 3,641.13 2,968.06 2,378.94 1,589.36 120.28
Loan given/taken to/from parties and margin money placed / refund received with/ from related parties are disclosed based on the maximum incremental amount given/taken and placed / refund
received during the reporting period.
Information relating to remuneration paid to key managerial person mentioned above excludes provision made for gratuity, leave encashment and deferred bonus which are provided for group of
employees on an overall basis. These are included on cash basis.
F-34
Edelweiss Housing Finance Limited
Notes forming part of Reformatted Statement of Assets and Liabilities
(Continued)
(Currency: Indian Rupees in millions) Annexure IV
2.27 Earnings per share
In accordance with Accounting Standard 20 on Earnings Per Share as prescribed under Section 133
of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014, the
computation of earnings per share is set out below:
An application has been made to the Stock Exchanges for permission to deal in and for an official quotation of
our NCDs. BSE has been appointed as the Designated Stock Exchange.
If permissions to deal in and for an official quotation of our NCDs are not granted by Stock Exchanges, our
Company will forthwith repay, without interest, all moneys received from the Applicants in pursuance of the
Prospectus.
Our Company shall ensure that all steps for the completion of the necessary formalities for listing and
commencement of trading at the Stock Exchange mentioned above are taken within 12 Working Days from the
date of closure of the Issue.
151
Consents Consents in writing of: (a) the Directors, (b) our Company Secretary and Compliance Officer; (c) Bankers to our Company; (d) Lead Managers; (e) the Registrar to the Issue; (f) Legal Advisor to the Issue; (g) Credit Rating Agencies; (h) the Debenture Trustee; and (i) Banker to the Issue to act in their respective capacities, have been obtained and the same will be filed along with a copy of the Draft Prospectus, Prospectus with the Stock Exchange. The consent of the Statutory Auditors of our Company, namely B S R & Associates LLP, Chartered Accountants, for (a) inclusion of their name as the Statutory Auditors; and (b) Examination report on Reformatted Financial Statements in the form and context in which they appear in this Prospectus have been obtained and has not withdrawn such consent and the same will be filed with the Stock Exchanges and the SEBI, along with a copy of this Prospectus. Expert Opinion Except the following, our Company has not obtained any expert opinions in connection with this Prospectus: 1. Our Company has received consent from its Statutory Auditors namely, B S R & Associates LLP,
Chartered Accountants to include their name as required under Section 26 (1)(v) of the Companies Act, 2013 and as an “Expert” as defined under Section 2(38) of the Companies Act, 2013, in this Prospectus in respect of the Examination report of the Auditor dated June 17, 2016 and statement of tax benefits dated June 17, 2016 included in this Prospectus and such consent has not been withdrawn as on the date of this Prospectus. However, the term “expert” shall not be construed to mean an “Expert” as defined under the U.S Securities Act, 1933.
2. Our Company has received consent from CARE to act as the credit rating agency to the Issue vide its letter dated June 17, 2016.
3. Our Company has received consent from ICRA Limited to act as the credit rating agency to the Issue
vide its letter dated June 17, 2016. 4. Our Company has received consent from Brickwork to act as the credit rating agency to the Issue vide its
letter dated June 16, 2016 Common form of Transfer The Issuer undertakes that there shall be a common form of transfer for the NCDs and the provisions of the Companies Act, 2013 and all applicable laws shall be duly complied with in respect of all transfer of debentures and registration thereof. Minimum Subscription In terms of the SEBI Debt Regulations, for an issuer undertaking a public issue of debt securities the minimum subscription for public issue of debt securities shall be 75% of the Base Issue. If our Company does not receive the minimum subscription of 75% of the Base Issue, prior to the Issue Closing Date, the entire subscription amount shall be refunded to the Applicants within 12 days from the date of closure of the Issue. The refunded subscription amount shall be credited only to the account from which the relevant subscription amount was remitted In the event, there is a delay, by the Issuer in making the aforesaid refund, our Company will pay interest at the rate of 15% per annum for the delayed period. Under Section 39(3) of the Companies Act, 2013 read with Rule 11(2) of the Companies (Prospectus and Allotment of Securities) Rules, 2014 if the stated minimum subscription amount is not received within the specified period, the application money received is to be credited only to the bank account from which the subscription was remitted. To the extent possible, where the required information for making such refunds is available with our Company and/or Registrar, refunds will be made to the account prescribed. However, where our Company and/or Registrar do not have the necessary information for making such refunds, our Company and/or Registrar will follow the guidelines prescribed by SEBI in this regard including its circular (bearing CIR/IMD/DF-1/20/2012) dated July 27, 2012.
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Filing of the Draft Prospectus
A copy of the Draft Prospectus has been filed with BSE and NSE in terms of Regulation 6 of the SEBI Debt
Regulations and the same was hosted on their respective websites for dissemination pursuant to Regulation 7 of the
SEBI Debt Regulations.
Filing of the Prospectus with the RoC
Our Company shall file a Prospectus as per requirements of Regulation 6(6) of the SEBI Debt Regulations. A
copy of the Prospectus will be filed with the RoC, in accordance with Section 26 and Section 31 of Companies
Act, 2013.
Debenture Redemption Reserve
Pursuant to Regulation 16 of the SEBI Debt Regulations and Section 71(4) of the Companies Act, 2013 which
require that when debentures are issued by any company, the company shall create a debenture redemption
reserve out of the profits of the company available for payment of dividend. Rule 18(7)(b)(iii) of the Companies
(Share Capital and Debentures) Rules, 2014 states that for companies such as our Company, the adequacy of
DRR shall be 25% of the value of debentures issued through a public issue as per the SEBI Debt Regulations. Accordingly our Company is required to create a DRR of 25% of the value of the NCDs issued vide the Issue. In
addition, as per Rule 18 (7)(e) under Chapter IV of the Companies Act, 2013, the amounts credited to DRR shall not
be utilised by our Company except for the redemption of the NCDs. The Rules further mandate that every company
required to maintain DRR shall deposit or invest, as the case may be, before the 30th day of April of each year a
sum which shall not be less than 15% of the amount of its debentures maturing during the year ending on the
31st day of March of the next year in any one or more following methods: (a) in deposits with any scheduled
bank, free from charge or lien; (b) in unencumbered securities of the Central Government or of any State
Government; (c) in unencumbered securities mentioned in clauses (a) to (d) and (ee) of Section 20 of the Indian
Trusts Act, 1882; (d) in unencumbered bonds issued by any other company which is notified under clause (f) of
Section 20 of the Indian Trusts Act, 1882. The above mentioned amount deposited or invested, must not be
utilized for any purpose other than for the repayment of debentures maturing during the year provided that the
amount remaining deposited or invested must not at any time fall below 15% of the amount of debentures
maturing during the year ending on the 31st day of March of that year.
Issue Related Expenses
A portion of the Issue proceeds will be used to meet Issue expenses. Following are the estimated Issue expenses:
Particulars Amount (`in
million)
As percentage of
Issue proceeds (in
%)
As percentage of total
expenses of the Issue (in %)
Fee Payable to Intermediaries 4.50 0.1% 4.5%
Lead Managers Fee, Selling and Brokerage Commission, SCSB Processing Fee 78.00 1.6% 77.2%
Registrar to the Issue 0.50 0.0% 0.5%
Debenture Trustee 0.10 0.0% 0.1%
Advertising and Marketing 10.00 0.2% 9.9%
Printing and Stationery Costs 2.50 0.1% 2.5%
Other Miscellaneous Expenses 5.50 0.1% 5.4%
Grand Total 101.10 2.0% 100.0%
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The above expenses are indicative and are subject to change depending on the actual level of subscription to the
Issue and the number of Allottees, market conditions and other relevant factors.
Our Company shall pay processing fees to the SCSBs for ASBA forms procured by Lead Managers/ Syndicate
Members/ Sub-Syndicate Members/Brokers / Sub brokers/Trading Members and submitted to the SCSBs for
blocking the Application Amount of the applicant, at the rate of ` 10 per Application Form procured (inclusive
of service tax and other applicable taxes). However, it is clarified that in case of ASBA Application Forms
procured directly by the SCSBs, the relevant SCSBs shall not be entitled to any ASBA Processing Fee.
Reservation
No portion of this Issue has been reserved.
Public / Rights Issues
Our Company has made rights issuance of 11,500,000 Equity Shares on March 27, 2015.
Except as disclosed above, our Company has not made any public or rights issuances in the last five years.
Details regarding the Company and other listed companies under the same management within the
meaning of section 370(1B) of the Companies Act, which made any equity share capital issue during the
last three years
EFSL has issued the following number of equity shares, under various employee stock option plans, during the
last three years
Fiscal 2016 Fiscal 2015 Fiscal 2014
2,22,84,011 2,47,37,337 52,03,050
Benefit/ interest accruing to Promoters/ Directors out of the object of the Issue
Neither the Promoter nor the Directors of our Company are interested in the Objects of the Issue.
Debentures or bonds and redeemable preference shares and other instruments issued by our Company
and outstanding
As on March 31, 2016 our Company has listed, rated, secured/ unsecured, non-convertible and redeemable
debentures. For further details see “Financial Indebtedness” on page 118 of this Prospectus.
Dividend
Our Company has no stated dividend policy. The declaration and payment of dividends on our shares will be
recommended by our Board of Directors and approved by our shareholders, at their discretion, and will depend
on a number of factors, including but not limited to our profits, capital requirements and overall financial
condition.
Details of the dividend declared by our Company on the Equity Shares for the Fiscals 2016, 2015, 2014,
2013 and 2012:
Nil
Revaluation of assets
Our Company has not revalued its assets in the last five years.
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Mechanism for redressal of investor grievances
The Registrar Agreement dated June 17, 2016 between the Registrar to the Issue and our Company will provide
for retention of records with the Registrar to the Issue for a period of at least three years from the last date of
despatch of the Allotment Advice, demat credit and refund orders to enable the investors to approach the
Registrar to the Issue for redressal of their grievances.
All grievances relating to the Issue may be addressed to the Registrar to the Issue, giving full details such as
name, address of the Applicant, number of NCDs applied for, amount paid on application and the bank branch
or collection centre where the application was submitted. The contact details of Registrar to the Issue are as
follows:
Karvy Computershare Private Limited
The Registrar shall endeavour to redress complaints of the investors within three (3) days of receipt of the
complaint during the currency of this MoU and continue to do so during the period it is required to maintain
records under the RTA Regulations and our Company shall extend necessary co-operation to the Registrar for
compliance with the said regulations. However, the Registrar shall ensure that the time taken to redress investor
complaints does not exceed fifteen (15) days from the date of receipt of complaint. The Registrar shall provide a
status report of investor complaints and grievances on a fortnightly basis to our Company. Similar status reports
should also be provided to our Company as and when required by our Company.
The details of the person appointed to act as Compliance Officer for the purposes of this Issue are set out below:
The NCDs have not been and will not be registered, listed or otherwise qualified in any jurisdiction outside India
and may not be offered or sold, and Applications may not be made by persons in any such jurisdiction, except in
compliance with the applicable laws of such jurisdiction. In particular, the NCDs have not been and will not be
registered under the U.S. Securities Act, 1933, as amended (the “Securities Act”) or the securities laws of any
state of the United States and may not be offered or sold within the United States or to, or for the account or
benefit of, U.S. persons (as defined in Regulation S under the Securities Act) except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state
securities laws. The Issuer has not registered and does not intend to register under the U.S. Investment Company
Act, 1940 in reliance on section 3(c)(7) thereof. This Prospectus may not be forwarded or distributed to any other
person and may not be reproduced in any manner whatsoever, and in particular, may not be forwarded to any
U.S. Person or to any U.S. address.
Applications may be made in single or joint names (not exceeding three). Applications should be made by Karta
in case the Applicant is an HUF. If the Application is submitted in joint names, the Application Form should
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contain only the name of the first Applicant whose name should also appear as the first holder of the depository
account (in case of Applicants applying for Allotment of the NCDs in dematerialized form) held in joint names.
If the depository account is held in joint names, the Application Form should contain the name and PAN of the
person whose name appears first in the depository account and signature of only this person would be required in
the Application Form. This Applicant would be deemed to have signed on behalf of joint holders and would be
required to give confirmation to this effect in the Application Form. Please ensure that such Applications contain
the PAN of the HUF and not of the Karta.
In the case of joint Applications, all payments will be made out in favour of the first Applicant. All
communications will be addressed to the first named Applicant whose name appears in the Application Form and
at the address mentioned therein.
Applicants are advised to ensure that they have obtained the necessary statutory and/or regulatory
permissions/consents/approvals in connection with applying for, subscribing to, or seeking Allotment of
NCDs pursuant to the Issue.
For further details, see the section titled “Issue Procedure” on page 176 of this Prospectus.
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TERMS OF THE ISSUE GENERAL TERMS OF THE ISSUE Authority for the Issue This Issue has been authorized by the Board of Directors of our Company pursuant to a resolution passed at their meeting held on May 11, 2016. Further, the present borrowing is within the borrowing limits under Section 180(1)(c) of the Companies Act, 2013 duly approved by the shareholders’ vide their resolution dated September 30, 2015. Principal Terms and Conditions of this Issue The NCDs being offered as part of the Issue are subject to the provisions of the Debt Regulations, the Companies Act, the Memorandum and Articles of Association of our Company, the terms of the Draft Prospectus, this Prospectus, the Application Forms, the terms and conditions of the Debenture Trust Agreement and the Debenture Trust Deed, other applicable statutory and/or regulatory requirements including those issued from time to time by SEBI/the Government of India/Stock Exchanges, RBI, NHB and/or other statutory/regulatory authorities relating to the offer, issue and listing of securities and any other documents that may be executed in connection with the NCDs. Ranking of NCDs The NCDs would constitute secured obligations of our Company and shall rank pari passu with the existing secured creditors on all loans and advances/ book debts/ receivables, both present and future of our Company and immovable property equal to the value one time of the debentures outstanding plus interest accrued thereon, and subject to any obligations under applicable statutory and/or regulatory requirements. The NCDs proposed to be issued under the Issue and all earlier issues of debentures outstanding in the books of our Company having corresponding assets as security, shall rank pari passu without preference of one over the other except that priority for payment shall be as per applicable date of redemption. Our Company confirms that all permissions and/or consents for creation of a pari passu charge on the book debts/ loans and advances/ receivables, both present and future and immovable property as stated above, have been obtained from all relevant creditors, lenders and debenture trustees of our Company, who have an existing charge over the above mentioned assets. Debenture Redemption Reserve Pursuant to Regulation 16 of the SEBI Debt Regulations and Section 71(4) of the Companies Act, 2013 which require that when debentures are issued by any company, the company shall create a debenture redemption reserve out of the profits of the company available for payment of dividend. Rule 18(7)(b)(iii) of the Companies (Share Capital and Debentures) Rules, 2014 states that for companies such as our Company, the adequacy of DRR shall be 25% of the value of debentures issued through a public issue as per the SEBI Debt Regulations. Accordingly our Company is required to create a DRR of 25% of the value of the NCDs issued vide the Issue. In addition, as per Rule 18 (7)(e) under Chapter IV of the Companies Act, 2013, the amounts credited to DRR shall not be utilised by our Company except for the redemption of the NCDs. The Rules further mandate that every company required to maintain DRR shall deposit or invest, as the case may be, before the 30th day of April of each year a sum which shall not be less than 15% of the amount of its debentures maturing during the year ending on the 31st day of March of the next year in any one or more following methods: (a) in deposits with any scheduled bank, free from charge or lien; (b) in unencumbered securities of the Central Government or of any State Government; (c) in unencumbered securities mentioned in clauses (a) to (d) and (ee) of Section 20 of the Indian Trusts Act, 1882; (d) in unencumbered bonds issued by any other company which is notified under clause (f) of Section 20 of the Indian Trusts Act, 1882. The above mentioned amount deposited or invested, must not be utilized for any purpose other than for the repayment of debentures maturing during the year provided that the amount remaining deposited or invested must not at any time fall below 15% of the amount of debentures maturing during the year ending on the 31st day of March of that year. Face Value The face value of each NCD shall be ₹ 1,000.
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Trustees for the NCD Holders
We have appointed IDBI Trusteeship Services Limited to act as the Debenture Trustee for the NCD Holders in
terms of Regulation 4(4) of the Debt Regulations and Section 71(5) of the Companies Act, 2013 and the rules
prescribed thereunder. We and the Debenture Trustee will execute a Debenture Trust Deed, inter alia,
specifying the powers, authorities and obligations of the Debenture Trustee and us. The NCD Holder(s) shall,
without further act or deed, be deemed to have irrevocably given their consent to the Debenture Trustee or any
of its agents or authorized officials to do all such acts, deeds, matters and things in respect of or relating to the
NCDs as the Debenture Trustee may in its absolute discretion deem necessary or require to be done in the
interest of the NCD Holder(s). Any payment made by us to the Debenture Trustee on behalf of the NCD
Holder(s) shall discharge us pro tanto to the NCD Holder(s).
The Debenture Trustee will protect the interest of the NCD Holders in the event of default by us in regard to
timely payment of interest and repayment of principal and they will take necessary action at our cost.
Events of Default
Subject to the terms of the Debenture Trust Deed, the Debenture Trustee at its discretion may, or if so requested
in writing by the holders of at least three-fourths of the outstanding amount of the NCDs or with the sanction of
a special resolution, passed at a meeting of the NCD Holders, (subject to being indemnified and/or secured by
the NCD Holders to its satisfaction), give notice to our Company specifying that the NCDs and/or any particular
series of NCDs, in whole but not in part are and have become due and repayable on such date as may be
specified in such notice inter alia if any of the events listed below occurs. The description below is indicative
and a complete list of events of default and its consequences will be specified in the Debenture Trust Deed.
Default is committed in payment of the principal amount of the NCDs on the due date(s); and Default is
committed in payment of any interest on the NCDs on the due date(s).
NCD Holder not a Shareholder
The NCD Holders will not be entitled to any of the rights and privileges available to the equity shareholders of
our Company, except to the extent of the right to receive the annual reports of our Company and such other
rights as may be prescribed under the Companies Act, 2013 and the rules prescribed thereunder and the SEBI
Listing Regulations.
Rights of NCD Holders
Some of the significant rights available to the NCD Holders are as follows:
1. The NCDs shall not, except as provided in the Companies Act, 2013, our Memorandum and Articles of
Association and/or the Debenture Trust Deed, confer upon the holders thereof any rights or privileges
available to our Company’s members/shareholders including, without limitation, the right to attend
and/or vote at any general meeting of our Company’s members/shareholders. However, if any resolution
affecting the rights attached to the NCDs is to be placed before the members/shareholders of our
Company, the said resolution will first be placed before the concerned registered NCD Holders for their
consideration. In terms of Section 136(1) of the Companies Act, 2013, holders of NCDs shall be entitled
to a copy of the balance sheet and copy of trust deed on a specific request made to our Company.
2. Subject to applicable statutory/regulatory requirements and terms of the Debenture Trust Deed, including
requirements of the RBI, the rights, privileges and conditions attached to the NCDs may be varied,
modified and/or abrogated with the consent in writing of the holders of at least three-fourths of the
outstanding amount of the NCDs or with the sanction of a special resolution passed at a meeting of the
concerned NCD Holders, provided that nothing in such consent or resolution shall be operative against
us, where such consent or resolution modifies or varies the terms and conditions governing the NCDs, if
the same are not acceptable to us.
3. Subject to applicable statutory/regulatory requirements and terms of the Debenture Trust Deed, the
registered NCD Holder or in case of joint-holders, the one whose name stands first in the register of
debenture holders shall be entitled to vote in respect of such NCDs, either in person or by proxy, at any
meeting of the concerned NCD Holders and every such holder shall be entitled to one vote on a show of
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hands and on a poll, his/her voting rights on every resolution placed before such meeting of the NCD
Holders shall be in proportion to the outstanding nominal value of NCDs held by him/her.
4. The NCDs are subject to the provisions of the Debt Regulations, the Companies Act, 2013, the
Memorandum and Articles of Association of our Company, the terms of the Draft Prospectus, this
Prospectus, the Application Forms, the terms and conditions of the Debenture Trust Deed, requirements
of the RBI, other applicable statutory and/or regulatory requirements relating to the issue and listing, of
securities and any other documents that may be executed in connection with the NCDs.
5. A register of NCD Holders holding NCDs in physical form (“Register of NCD Holders”) will be
maintained in accordance with Section 88 of the Companies Act, 2013 and all interest and principal sums
becoming due and payable in respect of the NCDs will be paid to the registered holder thereof for the
time being or in the case of joint-holders, to the person whose name stands first in the Register of NCD
Holders as on the Record Date. For the NCDs issued in dematerialized form, the Depositories shall also
maintain the upto date record of holders of the NCDs in dematerialized Form. In terms of Section 88(3)
of the Companies Act, 2013, the register and index of beneficial of NCDs maintained by a Depository for
any NCDs in dematerialized form under Section 11 of the Depositories Act shall be deemed to be a
Register of NCD holders for this purpose.
6. Subject to compliance with applicable statutory requirements, the NCDs can be rolled over only with the
consent of the holders of at least 75% of the outstanding amount of the NCDs after providing at least 21
days prior notice for such roll over and in accordance with the SEBI Debt Regulations. Our Company
shall redeem the debt securities of all the debt securities holders, who have not given their positive
consent to the roll-over.
The aforementioned rights of the NCD holders are merely indicative. The final rights of the NCD holders will
be as per the terms of the Offer Document and the Debenture Trust Deed.
Nomination facility to NCD Holder
In accordance with Rule 19 of the Companies (Share Capital and Debentures) Rules, 2014 (“Rule 19”) and the
Companies Act, 2013, the sole NCD holder, or first NCD holder, along with other joint NCD Holders’ (being
individual(s)), may nominate, in the Form No. SH.13, any one person with whom, in the event of the death of
Applicant the NCDs were Allotted, if any, will vest. Where the nomination is made in respect of the NCDs held
by more than one person jointly, all joint holders shall together nominate in Form No.SH.13 any person as
nominee. A nominee entitled to the NCDs by reason of the death of the original holder(s), will, in accordance
with Rule 19 and Section 56 of the Companies Act, 2013, be entitled to the same benefits to which he or she
will be entitled if he or she were the registered holder of the NCDs. Where the nominee is a minor, the NCD
holder(s) may make a nomination to appoint, in Form No. SH.14, any person to become entitled to NCDs in the
event of the holder‘s death during minority. A nomination will stand rescinded on a sale/transfer/alienation of
NCDs by the person nominating. A buyer will be entitled to make a fresh nomination in the manner prescribed.
Fresh nomination can be made only on the prescribed form available on request at our Registered Office,
Corporate Office or with the Registrar to the Issue.
NCD Holder(s) are advised to provide the specimen signature of the nominee to us to expedite the transmission
of the NCD(s) to the nominee in the event of demise of the NCD Holder(s). The signature can be provided in the
Application Form or subsequently at the time of making fresh nominations. This facility of providing the
specimen signature of the nominee is purely optional.
In accordance with Rule 19, any person who becomes a nominee by virtue of the Rule 19, will on the production
of such evidence as may be required by the Board, elect either:
(a) to register himself or herself as holder of NCDs; or
(b) to make such transfer of the NCDs, as the deceased holder could have made.
Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself
or herself or to transfer the NCDs, and if the notice is not complied with, within a period of 90 days, our Board
may thereafter withhold payment of all interests or other monies payable in respect of the NCDs, until the
requirements of the notice have been complied with.
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For all NCDs held in the dematerialized form, nominations registered with the respective Depository Participant
of the Applicant would prevail. If the investors require changing their nomination, they are requested to inform
their respective Depository Participant in connection with NCDs held in the dematerialized form.
Applicants who have opted for allotment of NCDs in the physical form and/or persons holding NCDs in the
physical form should provide required details in connection with their nominee to our Company and inform
our Company in connection with NCDs held in the physical form.
Jurisdiction
Exclusive jurisdiction for the purpose of the Issue is with the competent courts of jurisdiction in Mumbai, India.
Application in the Issue
NCDs being issued through the Offer Document can be applied for, through a valid Application Form filled in
by the applicant along with attachments, as applicable.
Form and Denomination
In case of NCDs held in physical form, a single certificate will be issued to the NCD Holder for the aggregate
amount (“Consolidated Certificate”) for each type of NCDs. A successful Applicant can also request for the
issue of NCDs certificates in the denomination of 1 (one) NCD at any time post allotment of the NCDs
(“Market Lot”).
In respect of Consolidated Certificates, we will, only upon receipt of a request from the NCD Holder, split such
Consolidated Certificates into smaller denominations subject to the minimum of Market Lot. No fees would be
charged for splitting of NCD certificates in Market Lots, but stamp duty payable, if any, would be borne by the
NCD Holder. The request for splitting should be accompanied by the original NCD certificate which would then
be treated as cancelled by us.
Transfer/Transmission of NCD(s)
The NCDs shall be transferred or transmitted freely in accordance with the applicable provisions of the
Companies Act, 2013. The provisions relating to transfer and transmission and other related matters in respect
of our shares contained in the Articles and the Companies Act, 2013 shall apply, mutatis mutandis (to the extent
applicable to debentures) to the NCD(s) as well. In respect of the NCDs held in physical form, a suitable
instrument of transfer as may be prescribed by the Issuer may be used for the same. The NCDs held in
dematerialized form shall be transferred subject to and in accordance with the rules/procedures as prescribed by
NSDL/CDSL and the relevant DPs of the transfer or transferee and any other applicable laws and rules notified
in respect thereof. The transferee(s) should ensure that the transfer formalities are completed prior to the Record
Date. In the absence of the same, interest will be paid/redemption will be made to the person, whose name
appears in the register of debenture holders maintained by the Depositories. In such cases, claims, if any, by the
transferees would need to be settled with the transferor(s) and not with the Issuer or Registrar.
Please see the section titled “Issue Structure” on page 156 of this Prospectus for the implications on the interest
applicable to NCDs held by Individual Investors on the Record Date and NCDs held by Non Individual
Investors on the Record Date.
For NCDs held in electronic form:
The normal procedure followed for transfer of securities held in dematerialized form shall be followed for
transfer of the NCDs held in electronic form. The seller should give delivery instructions containing details of
the buyer’s DP account to his depository participant.
In case the transferee does not have a DP account, the seller can re-materialise the NCDs and thereby convert
his dematerialized holding into physical holding. Thereafter, the NCDs can be transferred in the manner as
stated above.
In case the buyer of the NCDs in physical form wants to hold the NCDs in dematerialized form, he can choose
to dematerialize the securities through his DP.
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Title
In case of:
(a) the NCDs held in the dematerialized form, the person for the time being appearing in the record of
beneficial owners maintained by the Depository; and
(b) the NCDs held in physical form, the person for the time being appearing in the Register of NCD Holders as
NCD Holder,
shall be treated for all purposes by our Company, the Debenture Trustee, the Depositories and all other persons
dealing with such person as the holder thereof and its absolute owner for all purposes regardless of any notice of
ownership, trust or any interest in it or any writing on, theft or loss of the Consolidated NCD Certificate issued
in respect of the NCDs and no person will be liable for so treating the NCD Holder.
No transfer of title of a NCD will be valid unless and until entered on the Register of NCD Holders or the
register and index of NCD Holders maintained by the Depository prior to the Record Date. In the absence of
transfer being registered, interest and/or Maturity Amount, as the case may be, will be paid to the person, whose
name appears first in the Register of NCD Holders maintained by the Depositories and/or our Company and/or
the Registrar, as the case may be. In such cases, claims, if any, by the purchasers of the NCDs will need to be
settled with the seller of the NCDs and not with our Company or the Registrar. The provisions relating to
transfer and transmission and other related matters in respect of our Company’s shares contained in the Articles
of Association of our Company and the Companies Act shall apply, mutatis mutandis (to the extent applicable)
to the NCDs as well.
Succession
Where NCDs are held in joint names and one of the joint holders dies, the survivor(s) will be recognized as the
NCD Holder(s). It will be sufficient for our Company to delete the name of the deceased NCD Holder after
obtaining satisfactory evidence of his death. Provided, a third person may call on our Company to register his
name as successor of the deceased NCD Holder after obtaining evidence such as probate of a will for the
purpose of proving his title to the debentures. In the event of demise of the sole or first holder of the Debentures,
our Company will recognise the executors or administrator of the deceased NCD Holders, or the holder of the
succession certificate or other legal representative as having title to the Debentures only if such executor or
administrator obtains and produces probate or letter of administration or is the holder of the succession
certificate or other legal representation, as the case may be, from an appropriate court in India. The directors of
our Company in their absolute discretion may, in any case, dispense with production of probate or letter of
administration or succession certificate or other legal representation.
Where a non-resident Indian becomes entitled to the NCDs by way of succession, the following steps have to be
complied with:
1. Documentary evidence to be submitted to the Legacy Cell of the RBI to the effect that the NCDs were
acquired by the non-resident Indian as part of the legacy left by the deceased NCD Holder.
2. Proof that the non-resident Indian is an Indian national or is of Indian origin.
3. Such holding by a non-resident Indian will be on a non-repatriation basis.
Joint-holders
Where two or more persons are holders of any NCD(s), they shall be deemed to hold the same as joint holders
with benefits of survivorship subject to other provisions contained in the Articles.
Procedure for Re-materialization of NCDs
NCD Holders who wish to hold the NCDs in physical form may do so by submitting a request to their DP at any
time after Allotment in accordance with the applicable procedure stipulated by the DP, in accordance with the
Depositories Act and/or rules as notified by the Depositories from time to time. Holders of NCDs who propose
to rematerialize their NCDs, would have to mandatorily submit details of their bank mandate along with
a copy of any document evidencing that the bank account is in the name of the holder of such NCDs and
their Permanent Account Number to our Company and the DP. No proposal for rematerialization of
NCDs would be considered if the aforementioned documents and details are not submitted along with the
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request for such rematerialization.
Restriction on transfer of NCDs
There are no restrictions on transfers and transmission of NCDs and on their consolidation/ splitting except as
may be required under applicable statutory and/or regulatory requirements including any requirements of the
RBI and/or as provided in our Articles of Association. Please refer to the section titled “Main Provisions of the
Articles of Association of our Company” on page 207 of this Prospectus.
Period of Subscription
ISSUE PROGRAMME
ISSUE OPENS ON July 8, 2016
ISSUE CLOSES ON July 27, 2016
Applications Forms for the Issue will be accepted only between 10.00 a.m. and 5.00 p.m. (Indian Standard
Time) or such extended time as may be permitted by the Stock Exchange, during the Issue Period as mentioned
above on all days between Monday and Friday (both inclusive barring public holiday), (i) by the Lead Managers
or the Trading Members of the Stock Exchange, as the case maybe, at the centers mentioned in Application
Form through the non-ASBA mode or, (ii) in case of ASBA Applications, (a) directly by the Designated
Branches of the SCSBs or (b) by the centers of the Lead Managers or the Trading Members of the Stock
Exchange, as the case maybe, only at the Selected Cities. On the Issue Closing Date Application Forms will be
accepted only between 10.00 a.m. and 3.00 p.m. (Indian Standard Time) and uploaded until 5.00 p.m. or such
extended time as may be permitted by the Stock Exchange.
Due to limitation of time available for uploading the Applications on the Issue Closing Date, Applicants are
advised to submit their Application Forms one day prior to the Issue Closing Date and, no later than 3.00 p.m
(Indian Standard Time) on the Issue Closing Date. Applicants are cautioned that in the event a large number of
Applications are received on the Issue Closing Date, there may be some Applications which are not uploaded
due to lack of sufficient time to upload. Such Applications that cannot be uploaded will not be considered for
allocation under the Issue. Application Forms will only be accepted on Working Days during the Issue Period.
Neither our Company, nor the Lead Managers or Trading Members of the Stock Exchange are liable for any
failure in uploading the Applications due to failure in any software/ hardware systems or otherwise. Please note
that the Basis of Allotment under the Issue will be on a date priority basis in accordance with SEBI Circular
dated October 29, 2013.
Interest/Premium and Payment of Interest/ Premium
Series I NCDs
In case of Series I NCDs, interest would be paid annually at the following Coupon Rate in connection with the
relevant categories of NCD holders, on the amount outstanding from time to time, commencing from the
Deemed Date of Allotment of each Series I NCDs:
Category of NCD holder Coupon rate (%) per annum
Category I Investor 9.50
Category II Investor 9.50
Category III Investor 9.50
Series I NCDs shall be redeemed at the Face Value along with the interest accrued thereon, if any, at the end of
36 months from the Deemed Date of Allotment
Series II NCDs
Series II NCDs shall be redeemed at ` 1,313.00 per NCD for Category I Investors, Category II Investors and
Category III Investors, at the end of 36 months from the Deemed Date of Allotment.
Series III NCDs
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In case of Series III NCDs, interest would be paid annually at the following Coupon Rate in connection with the
relevant categories of NCD holders, on the amount outstanding from time to time, commencing from the
Deemed Date of Allotment of each Series I NCDs:
Category of NCD holder Coupon rate (%) per annum
Category I Investor 9.75
Category II Investor 9.75
Category III Investor 9.75
Series III NCDs shall be redeemed at the Face Value along with the interest accrued thereon, if any, at the end
of 60 months from the Deemed Date of Allotment.
Series IV NCDs
Series II NCDs shall be redeemed at ` 1,592.75 per NCD for Category I Investors, Category II Investors and Category III Investors, at the end of 60 months from the Deemed Date of Allotment.
Series V NCDs
In case of Series V NCDs, interest would be paid monthly at the following Coupon Rate in connection with the
relevant categories of NCD holders, on the amount outstanding from time to time, commencing from the
Deemed Date of Allotment of each Series V NCDs:
Category of NCD holder Coupon rate (%) per annum
Category I Investor 9.57
Category II Investor 9.57
Category III Investor 9.57
Series V NCDs shall be redeemed at the Face Value along with the interest accrued thereon, if any, at the end of
120 months from the Deemed Date of Allotment.
Series VI NCDs
In case of Series VI NCDs, interest would be paid annually at the following Coupon Rate in connection with the
relevant categories of NCD holders, on the amount outstanding from time to time, commencing from the
Deemed Date of Allotment of each Series VI NCDs:
Category of NCD holder Coupon rate (%) per annum
Category I Investor 10.00
Category II Investor 10.00
Category III Investor 10.00
Series VI NCDs shall be redeemed at the Face Value along with the interest accrued thereon, if any, at the end
of 120 months from the Deemed Date of Allotment.
Series VII NCDs
Series VII NCDs shall be redeemed at ` 2,594.50 per NCD for Category I Investors, Category II Investors and
Category III Investors, at the end of 120 months from the Deemed Date of Allotment.
Taxation
Any tax exemption certificate/document must be lodged at the office of the Registrar at least 7 (seven) days
prior to the Record Date or as specifically required, failing which tax applicable on interest will be deducted at
source on accrual thereof in our Company’s books and/or on payment thereof, in accordance with the provisions
of the IT Act and/or any other statutory modification, enactment or notification as the case may be. A tax
deduction certificate will be issued for the amount of tax so deducted.
As per clause (ix) of Section 193 of the I.T. Act, no tax is required to be withheld on any interest payable on any
security issued by a company, where such security is in dematerialized form and is listed on a recognized stock
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exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 and the rules made
thereunder. Accordingly, no tax will be deducted at source from the interest on listed NCDs held in the
dematerialized form.
However in case of NCDs held in physical form, as per the current provisions of the IT Act, tax will not be
deducted at source from interest payable on such NCDs held by the investor (in case of resident Individuals and
HUFs), if such interest does not exceed ₹ 5,000 in any financial year. If interest exceeds the prescribed limit of
₹5,000 on account of interest on the NCDs, then the tax will be deducted at applicable rate. However in case of
NCD Holders claiming non-deduction or lower deduction of tax at source, as the case may be, the NCD Holder
should furnish either (a) a declaration (in duplicate) in the prescribed form i.e. (i) Form 15H which can be given
by Individuals who are of the age of 60 years or more (ii) Form 15G which can be given by all Applicants (other
than companies, and firms ), or (b) a certificate, from the Assessing Officer which can be obtained by all
Applicants (including companies and firms) by making an application in the prescribed form i.e. Form No.13.
The aforesaid documents, as may be applicable, should be submitted to our Company quoting the name of the
sole/ first NCD Holder, NCD folio number and the distinctive number(s) of the NCD held, prior to the Record
Date to ensure non-deduction/lower deduction of tax at source from interest on the NCD. The investors need to
submit Form 15H/ 15G/certificate in original from Assessing Officer for each financial year during the currency
of the NCD to ensure non-deduction or lower deduction of tax at source from interest on the NCD.
If the date of interest payment falls on a Saturday, Sunday or a public holiday in Mumbai or Chennai or any
other payment centre notified in terms of the Negotiable Instruments Act, 1881, then interest would be paid on
the next working day. Payment of interest would be subject to the deduction as prescribed in the I.T. Act or any
statutory modification or re-enactment thereof for the time being in force.
Subject to the terms and conditions in connection with computation of applicable interest on the Record Date,
please note that in case the NCDs are transferred and/or transmitted in accordance with the provisions of this
Prospectus read with the provisions of the Articles of Association of our Company, the transferee of such NCDs
or the deceased holder of NCDs, as the case may be, shall be entitled to any interest which may have accrued on
the NCDs.
Day Count Convention:
Interest shall be computed on a 365 days-a-year basis on the principal outstanding on the NCDs as per the SEBI
Circular bearing no. CIR/IMD/DF/18/2013 dated October 29, 2013. Day count convention shall be actual /
actual.
Effect of holidays on payments:
If the date of payment of interest does not fall on a Working Day, then the immediately succeeding Working
Day will be considered as the effective date for such payment of interest along with interest for such additional
period (the “Effective Date”). Such additional interest will be deducted from the interest payable on the next
date of payment of interest. Interest and principal or other amounts, if any, will be paid on the Effective Date.
Payment of interest will be subject to the deduction of tax as per Income Tax Act or any statutory modification
or re-enactment thereof for the time being in force. In case the Maturity Date (also being the last Interest
Payment Date) does not fall on a Working Day, the payment will be made on the immediately preceding
Working Day, along with coupon/interest accrued on the NCDs until but excluding the date of such payment.
Illustration for guidance in respect of the day count convention and effect of holidays on payments.
The illustration for guidance in respect of the day count convention and effect of holidays on payments, as
required by SEBI Circular No. CIR/IMD/DF/18/2013 October 29, 2013 will be as disclosed in Annexure C to
the Prospectus.
Interest on Application Amount
Interest on application amounts received which are used towards allotment of NCDs:
Our Company shall pay interest on application amount, as per the Effective Yield applicable to the relevant
Series of NCD (as per the Category of the Investor), allotted to the Applicants, other than to ASBA Applicants,
subject to deduction of income tax under the provisions of the Income Tax Act, 1961, as amended, as
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applicable, to any Applicants to whom NCDs are allotted pursuant Issue from the date of realization of the
cheque(s)/demand draft(s) upto one day prior to the Deemed Date of Allotment. In the event that such date of
realization of the cheque(s)/ demand draft(s) is not ascertainable in terms of banking records, we shall pay
interest on Application Amounts on the amount Allotted from three Working Days from the date of upload of
each Application on the electronic Application platform of the BSE and NSE upto one day prior to the Deemed
Date of Allotment.
Our Company may enter into an arrangement with one or more banks in one or more cities for direct credit of
interest to the account of the Applicants. Alternatively, the interest warrant will be dispatched along with the
Letter(s) of Allotment/ NCD Certificates at the sole risk of the Applicant, to the sole/first Applicant.
Interest on application amounts received which are liable to be refunded:
Our Company shall pay interest on application amount which is liable to be refunded to the Applicants, other
than to ASBA Applicants, in accordance with the provisions of the SEBI Debt Regulations and/or the
Companies Act, 2013, or other applicable statutory and/or regulatory requirements, subject to deduction of
income tax under the provisions of the Income Tax Act, 1961, as amended, as applicable, to any Applicants to
whom NCDs are allotted pursuant to the Issue from the date of realization of the cheque(s)/demand draft(s) upto
one day prior to the Deemed Date of Allotment. In the event that such date of realization of the cheque(s)/
demand draft(s) is not ascertainable in terms of banking records, we shall pay interest on Application Amounts
on the amount Allotted from three Working Days from the date of upload of each Application on the electronic
Application platform of the BSE and NSE upto one day prior to the Deemed Date of Allotment, at the rate of
5% per annum. Such interest shall be paid along with the monies liable to be refunded. Interest warrant will be
dispatched / credited (in case of electronic payment) along with the Letter(s) of Refund at the sole risk of the
Applicant, to the sole/first Applicant.
In the event our Company does not receive a minimum subscription, as specified in this Prospectus on the date
of closure of the Issue, our Company shall pay interest on application amount which is liable to be refunded to
the Applicants, other than to ASBA Applicants, in accordance with the provisions of the Debt Regulations
and/or the Companies Act, 2013, or other applicable statutory and/or regulatory requirements, subject to
deduction of income tax under the provisions of the Income Tax Act, 1961, as amended, as applicable, from the
date of realization of the cheque(s)/demand draft(s) or 3 (three) days from the date of receipt of the application
(being the date of upload of each application on the electronic platform of the Stock Exchange) whichever is
later and upto the date of closure of the Issue at the rate of 15% per annum. Such interest shall be paid along
with the monies liable to be refunded. Interest warrant will be dispatched / credited (in case of electronic
payment) to the account of the Applicants, other than ASBA Applicants, as mentioned in the depositary records
along with the Letter(s) of Refund at the sole risk of the applicant, to the sole/first applicant.
Provided that, notwithstanding anything contained hereinabove, our Company shall not be liable to pay any
interest on monies liable to be refunded in case of (a) invalid applications or applications liable to be rejected,
(b) applications which are withdrawn by the Applicant and/or (c) monies paid in excess of the amount of NCDs
applied for in the Application Form. Please refer to the sub-section “Rejection of Application” at page 197 of
this Prospectus.
Maturity and Redemption
The NCDs issued pursuant to this Prospectus have a fixed maturity date. The NCDs will be redeemed at the
expiry of 36 months from the Deemed Date of Allotment for Option I and II, 60 months from the Deemed Date
of Allotment for Option III and IV, 120 months from the Deemed Date of Allotment for Option V, VI and VII.
Put / Call Option
There is no put or call option available to any Investor.
Application Size
Each application should be for a minimum of ten (10) NCDs and multiples of one (1) NCD thereafter. The
minimum application size for each application for NCDs would be `10,000 (across all Options of NCDs) and in
multiples of `1,000 thereafter.
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Applicants can apply for any or all types of NCDs offered hereunder (any/all series) provided the Applicant has
applied for minimum application size using the same Application Form.
Applicants are advised to ensure that applications made by them do not exceed the investment limits or
maximum number of NCDs that can be held by them under applicable statutory and or regulatory
provisions.
Terms of Payment
The entire issue price of ₹ 1,000 per NCD is payable on application itself. In case of allotment of lesser number
of NCDs than the number of NCDs applied for, our Company shall refund the excess amount paid on
application to the Applicant in accordance with the terms of this Prospectus.
Manner of Payment of Interest / Refund
The manner of payment of interest / refund in connection with the NCDs is set out below:
For NCDs held in physical form:
The bank details will be obtained from the Application Form or from the copy of the cancelled cheque or such
other documentary proof as may have been annexed to the Application Form by the Applicant for payment of
interest / refund / redemption as the case may be. In case of NCDs held in physical form on account of re-
materialization and/or subsequent transfer post-allotment, the bank details will be obtained from the documents
submitted to our Company along with the re-materialisation request.
For NCDs applied / held in electronic form:
The bank details will be obtained from the Depositories for payment of Interest / refund / redemption as the case
may be. Applicants who have applied for or are holding the NCDs in electronic form, are advised to
immediately update their bank account details as appearing on the records of the depository participant. Please
note that failure to do so could result in delays in credit of refunds to the Applicant at the Applicant’s sole risk,
and the Lead Managers, our Company nor the Registrar to the Issue shall have any responsibility and undertake
any liability for the same.
The mode of interest / refund / redemption payments shall be undertaken in the following order of preference:
1. Direct Credit: Investors having their bank account with the Refund Bank, shall be eligible to receive
refunds, if any, through direct credit. The refund amount, if any, would be credited directly to their
bank account with the Refund Banker.
2. NECS: Payment of interest / refund / redemption shall be undertaken through NECS for Applicants
having an account at the centers mentioned in NECS MICR list.
This mode of payment of refunds would be subject to availability of complete bank account details
including the MICR code, IFSC code, bank account number, bank name and branch name as appearing
on a cheque leaf, from the Depositories. One of the methods for payment of interest / refund /
redemption is through NECS for Applicants having a bank account at any of the abovementioned
centers.
3. RTGS: Applicants having a bank account with a participating bank and whose interest payment /
refund / redemption amount exceeds ₹2 lacs, or such amount as may be fixed by RBI from time to time,
have the option to receive refund through RTGS. Such eligible Applicants who indicate their
preference to receive interest payment / refund / redemption through RTGS are required to provide the
IFSC code in the Application Form or intimate our Company and the Registrars to the Issue at least 7
(seven) days before the Record Date. Charges, if any, levied by the Applicant’s bank receiving the
credit would be borne by the Applicant. In the event the same is not provided, interest payment / refund
/ redemption shall be made through NECS subject to availability of complete bank account details for
the same as stated above.
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4. NEFT: Payment of interest / refund / redemption shall be undertaken through NEFT wherever the
Applicants’ bank has been assigned the Indian Financial System Code (“IFSC”), which can be linked
to a Magnetic Ink Character Recognition (“MICR”), if any, available to that particular bank branch.
IFSC Code will be obtained from the website of RBI as on a date immediately prior to the date of
payment of refund, duly mapped with MICR numbers. Wherever the Applicants have registered their
nine digit MICR number and their bank account number while opening and operating the de-mat
account, the same will be duly mapped with the IFSC Code of that particular bank branch and the
payment of interest/refund/redemption will be made to the Applicants through this method.
5. Registered Post/Speed Post: For all other Applicants, including those who have not updated their
bank particulars with the MICR code, the interest payment / refund / redemption orders shall be
dispatched through Speed Post/ Registered Post only to Applicants that have provided details of a
registered address in India. Refunds may be made by cheques, pay orders, or demand drafts drawn on
the relevant Refund Bank and payable at par at places where Applications are received. All cheques,
pay orders, or demand drafts as the case may be, shall be sent by registered/speed post at the Investor’s
sole risk. Bank charges, if any, for cashing such cheques, pay orders, or demand drafts at other centres
will be payable by the Applicant.
Refunds for Applicants other than ASBA Applicants
Within 12 Working Days of the Issue Closing Date, the Registrar to the Issue will dispatch refund orders/issue
instructions for electronic refund, as applicable, of all amounts payable to unsuccessful Applicants (other than
ASBA Applicants) and also any excess amount paid on Application, after adjusting for allocation/Allotment of
NCDs. In case of Applicants who have applied for Allotment of NCDs in dematerialized form, the Registrar to
the Issue will obtain from the Depositories the Applicant’s bank account details, including the MICR code, on
the basis of the DP ID and Client ID provided by the Applicant in their Application Forms, for making refunds.
In case of Applicants who have applied for Allotment of NCDs in physical form, the bank details will be
extracted from the Application Form or the copy of the cancelled cheque. For Applicants who receive refunds
through ECS, direct credit, RTGS or NEFT, the refund instructions will be issued to the clearing system within
12 Working Days of the Issue Closing Date. A suitable communication will be dispatched to the Applicants
receiving refunds through these modes, giving details of the amount and expected date of electronic credit of
refund. Such communication will be mailed to the addresses (in India) of Applicants, as per Demographic
Details received from the Depositories or the address details provided in the Application Form, in case of
Applicants who have applied for Allotment of NCDs in physical form. The Demographic Details or the address
details provided in the Application Form would be used for mailing of the physical refund orders, as applicable.
Investors who have applied for NCDs in electronic form, are advised to immediately update their bank account
details as appearing on the records of their Depository Participant. Failure to do so could result in delays in
credit of refund to the investors at their sole risk and neither the Lead Managers nor our Company shall have
any responsibility and undertake any liability for such delays on part of the investors.
Printing of Bank Particulars on Interest Warrants
As a matter of precaution against possible fraudulent encashment of refund orders and interest/redemption
warrants due to loss or misplacement, the particulars of the Applicant’s bank account are mandatorily required
to be given for printing on the orders/ warrants. In relation to NCDs applied and held in dematerialized form,
these particulars would be taken directly from the depositories. In case of NCDs held in physical form either on
account of rematerialisation or transfer, the investors are advised to submit their bank account details with our
Company / Registrar at least 7 (seven) days prior to the Record Date failing which the orders / warrants will be
dispatched to the postal address of the holder of the NCDs as available in the records of our Company. Bank
account particulars will be printed on the orders/ warrants which can then be deposited only in the account
specified.
Buy Back of NCDs
Our Company may, at its sole discretion, from time to time, consider, subject to applicable statutory and/or
regulatory requirements, buyback of NCDs, upon such terms and conditions as may be decided by our
Company.
Our Company may from time to time invite the NCD Holders to offer the NCDs held by them through one or
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more buy-back schemes and/or letters of offer upon such terms and conditions as our Company may from time
to time determine, subject to applicable statutory and/or regulatory requirements. Such NCDs which are bought
back may be extinguished, re-issued and/or resold in the open market with a view of strengthening the liquidity
of the NCDs in the market, subject to applicable statutory and/or regulatory requirements.
Procedure for Redemption by NCD Holders
The procedure for redemption is set out below:
NCDs held in physical form:
No action would ordinarily be required on the part of the NCD Holder at the time of redemption and the
redemption proceeds would be paid to those NCD Holders whose names stand in the register of NCD Holders
maintained by us on the Record Date fixed for the purpose of Redemption. However, our Company may require
that the NCD certificate(s), duly discharged by the sole holder/all the joint-holders (signed on the reverse of the
NCD certificate(s)) be surrendered for redemption on maturity and should be sent by the NCD Holder(s) by
Registered Post with acknowledgment due or by hand delivery to our office or to such persons at such addresses
as may be notified by us from time to time. NCD Holder(s) may be requested to surrender the NCD
certificate(s) in the manner as stated above, not more than three months and not less than one month prior to the
redemption date so as to facilitate timely payment.
We may at our discretion redeem the NCDs without the requirement of surrendering of the NCD certificates by
the holder(s) thereof. In case we decide to do so, the holders of NCDs need not submit the NCD certificates to
us and the redemption proceeds would be paid to those NCD Holders whose names stand in the register of NCD
Holders maintained by us on the Record Date fixed for the purpose of redemption of NCDs. In such case, the
NCD certificates would be deemed to have been cancelled. Also see the para “Payment on Redemption” given
below.
NCDs held in electronic form:
No action is required on the part of NCD Holder(s) at the time of redemption of NCDs.
Payment on Redemption
The manner of payment of redemption is set out below:
NCDs held in physical form:
The payment on redemption of the NCDs will be made by way of cheque/pay order/ electronic modes.
However, if our Company so requires, the aforementioned payment would only be made on the surrender of
NCD certificate(s), duly discharged by the sole holder / all the joint-holders (signed on the reverse of the NCD
certificate(s). Dispatch of cheques/pay order, etc. in respect of such payment will be made on the Redemption
Date or (if so requested by our Company in this regard) within a period of 30 days from the date of receipt of the
duly discharged NCD certificate.
In case we decide to do so, the redemption proceeds in the manner stated above would be paid on the
Redemption Date to those NCD Holders whose names stand in the Register of NCD Holders maintained by
us/Registrar to the Issue on the Record Date fixed for the purpose of Redemption. Hence the transferees, if any,
should ensure lodgement of the transfer documents with us at least 7 (seven) days prior to the Record Date. In
case the transfer documents are not lodged with us at least 7 (seven) days prior to the Record Date and we
dispatch the redemption proceeds to the transferor, claims in respect of the redemption proceeds should be
settled amongst the parties inter se and no claim or action shall lie against us or the Registrars.
Our liability to holder(s) towards his/their rights including for payment or otherwise shall stand extinguished
from the date of redemption in all events and when we dispatch the redemption amounts to the NCD Holder(s).
Further, we will not be liable to pay any interest, income or compensation of any kind from the date of
redemption of the NCD(s).
NCDs held in electronic form:
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On the redemption date, redemption proceeds would be paid by cheque /pay order / electronic mode to those
NCD Holders whose names appear on the list of beneficial owners given by the Depositories to us. These names
would be as per the Depositories’ records on the Record Date fixed for the purpose of redemption. These NCDs
will be simultaneously extinguished to the extent of the amount redeemed through appropriate debit corporate
action upon redemption of the corresponding value of the NCDs. It may be noted that in the entire process
mentioned above, no action is required on the part of NCD Holders.
Our liability to NCD Holder(s) towards his/their rights including for payment or otherwise shall stand
extinguished from the date of redemption in all events and when we dispatch the redemption amounts to the
NCD Holder(s).
Further, we will not be liable to pay any interest, income or compensation of any kind from the date of
redemption of the NCD(s).
Issue of Duplicate NCD Certificate(s)
If any NCD certificate(s) is/are mutilated or defaced or the cages for recording transfers of NCDs are fully
utilised, the same may be replaced by us against the surrender of such certificate(s). Provided, where the NCD
certificate(s) are mutilated or defaced, the same will be replaced as aforesaid only if the certificate numbers and
the distinctive numbers are legible.
If any NCD certificate is destroyed, stolen or lost then upon production of proof thereof to our satisfaction and
upon furnishing such indemnity/security and/or documents as we may deem adequate, duplicate NCD
certificate(s) shall be issued. Upon issuance of a duplicate NCD certificate, the original NCD certificate shall
stand cancelled.
Right to Reissue NCD(s)
Subject to the provisions of the Companies Act, 2013, where we have fully redeemed or repurchased any
NCD(s), we shall have and shall be deemed always to have had the right to keep such NCDs in effect without
extinguishment thereof, for the purpose of resale or reissue and in exercising such right, we shall have and be
deemed always to have had the power to resell or reissue such NCDs either by reselling or reissuing the same
NCDs or by issuing other NCDs in their place. The aforementioned right includes the right to reissue original
NCDs.
Sharing of Information
We may, at our option, use on our own, as well as exchange, share or part with any financial or other
information about the NCD Holders available with us, with our subsidiaries, if any and affiliates and other
banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and neither we or our
affiliates nor their agents shall be liable for use of the aforesaid information.
Notices
All notices to the NCD Holder(s) required to be given by us or the Debenture Trustee shall be published in one
English language newspaper having wide circulation and one regional language daily newspaper in Mumbai
and/or will be sent by post/ courier or through email or other electronic media to the Registered Holders of the
NCD(s) from time to time.
Future Borrowings
We will be entitled to borrow/raise loans or avail of financial assistance in whatever form as also to issue
debentures/ NCDs/other securities in any manner having such ranking in priority, pari passu or otherwise,
subject to applicable consents, approvals or permissions that may be required under any
statutory/regulatory/contractual requirement, and change the capital structure including the issue of shares of
any class, on such terms and conditions as we may think appropriate, without the consent of, or intimation to,
the NCD Holders or the Debenture Trustee in this connection.
Impersonation
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As a matter of abundant caution, attention of the Investors is specifically drawn to the provisions of sub-section
(1) of Section 38 of the Companies Act, 2013 which is reproduced below:
“Any person who- (a) makes or abets making of an application in a fictitious name to a company for acquiring,
or subscribing for, its securities; or (b) makes or abets making of multiple applications to a company in different
names or in different combinations of his name or surname for acquiring or subscribing for its securities; or (c)
otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to
any other person in a fictitious name, shall be liable for action under Section 447 of the Companies Act, 2013”
Pre-closure
Our Company, in consultation with the Lead Managers reserves the right to close the Issue at any time prior to
the Issue Closing Date, subject to receipt of minimum subscription or as may be specified in the Prospectus. Our
Company shall allot NCDs with respect to the Applications received until the time of such pre-closure in
accordance with the Basis of Allotment as described hereinabove and subject to applicable statutory and/or
regulatory requirements. In the event of such early closure of the Issue, our Company shall ensure that public
notice of such early closure is published on or before such early date of closure or the Issue Closing Date, as
applicable, through advertisement(s) in all those newspapers in which preissue advertisement and advertisement
for opening or closure of the issue have been given.
Minimum Subscription
In terms of the SEBI circular dated June 17, 2014, for an issuer undertaking a public issue of debt securities the
minimum subscription for public issue of debt securities shall be 75% of the Base Issue. If our Company does
not receive the minimum subscription of 75 % of the Base Issue, i.e. ` 1,875.00 million, prior to the Issue
Closing Date, the entire subscription amount shall be refunded to the Applicants within 12 Days from the date of
closure of the Issue. The refunded subscription amount shall be credited only to the account from which the
relevant subscription amount was remitted In the event, there is a delay, by the Issuer in making the aforesaid
refund, our Company will pay interest at the rate of 15% per annum for the delayed period.
Utilisation of Application Amount
The sum received in respect of the Issue will be kept in separate bank accounts and we will have access to such
funds as per applicable provisions of law(s), regulations and approvals.
Utilisation of Issue Proceeds
a) All monies received pursuant to the issue of NCDs to public shall be transferred to a separate bank
account other than the bank account referred to in sub-section (3) of Section 40 of the Companies Act,
2013.
b) Details of all monies utilised out of Issue referred to in sub-item (a) shall be disclosed under an
appropriate separate head in our Balance Sheet indicating the purpose for which such monies had been
utilised; and
c) Details of all unutilised monies out of issue of NCDs, if any, referred to in sub-item (a) shall be
disclosed under an appropriate separate head in our Balance Sheet indicating the form in which such
unutilised monies have been invested.
d) We shall utilize the Issue proceeds only upon execution of the documents for creation of security as
stated in this Prospectus and on receipt of the minimum subscription.
e) The Issue proceeds shall not be utilized towards full or part consideration for the purchase or any other
acquisition, inter alia by way of a lease, of any immovable property.
Events of Default
Subject to the terms of the Debenture Trust Deed, the Debenture Trustee at its discretion may, or if so requested
in writing by the holders of at least three-fourths of the outstanding amount of the NCDs or with the sanction of
a special resolution, passed at a meeting of the NCD Holders, (subject to being indemnified and/or secured by
the NCD Holders to its satisfaction), give notice to our Company specifying that the NCDs and/or any
particular Options of NCDs, in whole but not in part are and have become due and repayable on such date as
may be specified in such notice inter alia if any of the events listed below occurs. The description below is
indicative and a complete list of events of default including cross defaults, if any, and its consequences will be
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specified in the respective Debenture Trust Deed:
(i) default is committed in payment of the principal amount of the NCDs on the due date(s); and
(ii) default is committed in payment of any interest on the NCDs on the due date(s)
Filing of the Prospectus with the RoC
A copy of the Prospectus will be filed with the RoC, in accordance with Section 26 and Section 31 of
Companies Act, 2013.
Pre-Issue Advertisement
Subject to Section 30 of the Companies Act, 2013, our Company will issue a statutory advertisement on or
before the Issue Opening Date. This advertisement will contain the information as prescribed in Schedule IV of
SEBI Debt Regulations in compliance with the Regulation 8(1) of SEBI Debt Regulations. Material updates, if
any, between the date of filing of the Prospectus with ROC and the date of release of the statutory
advertisement, will be included in the statutory advertisement.
Listing
The NCDs offered through this Prospectus are proposed to be listed on BSE and NSE. Our Company has
obtained an ‘in-principle’ approval for the Issue from BSE and NSE vide their letter no DCS/BM/PI-
BOND/15/15-16 dated June 24, 2016 and letter no NSE/LIST/77706 dated June 24, 2016 respectively. For the
purposes of the Issue, BSE shall be the Designated Stock Exchange.
Our Company will use best efforts to ensure that all steps for the completion of the necessary formalities for
listing and commencement of trading at the Stock Exchange are taken within 12 Working Days of the Issue
Closing Date. For the avoidance of doubt, it is hereby clarified that in the event of non subscription to any one
or more of the series, such series(s) of NCDs shall not be listed.
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ISSUE PROCEDURE
This section applies to all Applicants. ASBA Applicants should note that the ASBA process involves application
procedures which may be different from the procedures applicable to Applicants who apply for NCDs through
any of the other channels, and accordingly should carefully read the provisions applicable to ASBA
Applications hereunder. Please note that all Applicants are required to make payment of the full Application
Amount along with the Application Form. In case of ASBA Applicants, an amount equivalent to the full
Application Amount will be blocked by the Designated Branches of the SCSBs.
ASBA Applicants should note that they may submit their ASBA Applications to the Lead Managers, or Trading
Members of the Stock Exchange only in the Specified Cities or directly to the Designated Branches of the
SCSBs. Applicants other than ASBA Applicants are required to submit their Applications to the Lead Manager,
or Trading Members of the Stock Exchange at the centres mentioned in the Application Form.
Applicants are advised to make their independent investigations and ensure that their Applications do not exceed the
investment limits or maximum number of NCDs that can be held by them under applicable law or as specified in this
Prospectus.
Please note that this section has been prepared based on the Circular No. CIR./IMD/DF-1/20/2012 dated July
27, 2012 issued by SEBI. The following Issue procedure is subject to the functioning and operations of the
necessary systems and infrastructure put in place by the Stock Exchange for implementation of the provisions of
the abovementioned circular, including the systems and infrastructure required in relation to Direct Online
Applications through the online platform and online payment facility to be offered by the Stock Exchange and is
also subject to any further clarifications, notification, modification, direction, instructions and/or
correspondence that may be issued by the Stock Exchange and/or SEBI. Please note that the Applicants will not
have the option to apply for NCDs under the Issue, through the direct online applications mechanism of the
Stock Exchange. Please note that clarifications and/or confirmations regarding the implementation of the
requisite infrastructure and facilities in relation to direct online applications and online payment facility have
been sought from the Stock Exchange and the Stock Exchange has confirmed that the necessary infrastructure
and facilities for the same have not been implemented by the Stock Exchange. Hence, the Direct Online
Application facility will not be available for this Issue.
Specific attention is drawn to the circular (No. CIR/IMD/DF/18/2013) dated October 29, 2013 issued by SEBI,
which amends the provisions of the 2012 SEBI Circular to the extent that it provides for allotment in public
issues of debt securities to be made on the basis of date of upload of each application into the electronic book of
the Stock Exchanges, as opposed to the date and time of upload of each such application.
PLEASE NOTE THAT ALL TRADING MEMBERS OF THE STOCK EXCHANGE WHO WISH TO
COLLECT AND UPLOAD APPLICATIONS IN THIS ISSUE ON THE ELECTRONIC APPLICATION
PLATFORM PROVIDED BY THE STOCK EXCHANGE WILL NEED TO APPROACH THE
RESPECTIVE STOCK EXCHANGE AND FOLLOW THE REQUISITE PROCEDURES AS MAY BE
PRESCRIBED BY THE RELEVANT STOCK EXCHANGE.
THE LEAD MANAGERS, THE SYNDICATE MEMBERS AND THE COMPANY SHALL NOT BE
RESPONSIBLE OR LIABLE FOR ANY ERRORS OR OMMISSIONS ON THE PART OF THE
TRADING MEMBERS IN CONNECTION WITH THE RESPONSIBILITY OF SUCH TRADING
MEMBERS IN RELATION TO COLLECTION AND UPLOAD OF APPLICATIONS IN THIS ISSUE
ON THE ELECTRONIC APPLICATION PLATFORM PROVIDED BY THE STOCK EXCHANGE.
FURTHER, THE RELEVANT STOCK EXCHANGE SHALL BE RESPONSIBLE FOR ADDRESSING
INVESTOR GREIVANCES ARISING FROM APPLICATIONS THROUGH TRADING MEMBERS
REGISTERED WITH SUCH STOCK EXCHANGE.
For purposes of the Issue, the term “Working Day” shall mean all days excluding Saturdays, Sundays or a
holiday of commercial banks in Mumbai, except with reference to Issue Period, where Working Days shall mean
all days, excluding Saturdays, Sundays and public holiday in India. Furthermore, for the purpose of post issue
period, i.e. period beginning from Issue Closure to listing of the securities, Working Days shall mean all days
excluding 2nd and 4th Saturdays of a month or Sundays or a holiday of commercial banks in Mumbai or a public
holiday in India..
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The information below is given for the benefit of the investors. Our Company and the Lead Managers are not
liable for any amendment or modification or changes in applicable laws or regulations, which may occur after
the date of this Prospectus.
PROCEDURE FOR APPLICATION
Availability of the Abridged Prospectus and Application Forms
Please note that there is a single Application Form for ASBA Applicants as well as Non-ASBA Applicants
who are Persons Resident in India.
Physical copies of the abridged Prospectus containing the salient features of the Prospectus together with
Application Forms may be obtained from:
(a) Our Company’s Registered Office and Corporate Office;
(b) Offices of the Lead Managers;
(c) Trading Members; and
(d) Designated Branches of the SCSBs.
Electronic Application Forms may be available for download on the websites of the Stock Exchange and on the
websites of the SCSBs that permit submission of ASBA Applications electronically. A unique application
number (“UAN”) will be generated for every Application Form downloaded from the websites of the Stock
Exchange. Our Company may also provide Application Forms for being downloaded and filled at such websites
as it may deem fit. In addition, brokers having online demat account portals may also provide a facility of
submitting the Application Forms virtually online to their account holders.
Trading Members of the Stock Exchange can download Application Forms from the websites of the Stock
Exchange. Further, Application Forms will be provided to Trading Members of the Stock Exchange at their
request.
On a request being made by any Applicant before the Issue Closing Date, physical copies of the Prospectus and
Application Form can be obtained from our Company’s Registered and Corporate Office, as well as offices of
the Lead Managers. Electronic copies of the Draft Prospectus and this Prospectus will be available on the
websites of the Lead Managers, the Stock Exchange, SEBI and the SCSBs.
Who are eligible to apply for NCDs?
The following categories of persons are eligible to apply in the Issue:
Category I Category II Category III
Institutional Investors Non Institutional Investors High Net-worth Individual,
(“HNIs”), Investors and Retail
Individual Investors
Resident Public Financial
Institutions, Statutory
Corporations including State
Industrial Development
Corporations, Commercial
Banks,
Co-operative Banks and
Regional Rural Banks, which
are authorised to invest in the
NCDs;
Provident Funds and Resident
Pension Funds with minimum
corpus of `250 million, ,
Superannuation Funds and
Gratuity Fund, which are
authorised to invest in the
Companies; bodies corporate
and societies registered under
the applicable laws in India
and authorised to invest in the
NCDs;
Educational institutions and
associations of persons and/or
bodies established pursuant to
or registered under any central
or state statutory enactment;
which are authorized to invest
in the NCDs;
Public/private
charitable/religious trusts
which are authorised to invest
in the NCDs;
Resident Indian individuals and
Hindu Undivided Families through
the Karta
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Category I Category II Category III
Institutional Investors Non Institutional Investors High Net-worth Individual,
(“HNIs”), Investors and Retail
Individual Investors
NCDs;
Venture Capital funds and / or
Alternative Investment Funds
registered with SEBI;
Insurance Companies
registered with the IRDA;
National Investment Fund (set
up by resolution no. F. No.
2/3/2005-DDII dated
November 23, 2005 of the
Government of India and
published in the Gazette of
India);
Insurance funds set up and
managed by the Indian army,
navy or the air force of the
Union of India or by the
Department of Posts, India
Mutual Funds, registered with
SEBI.
Scientific and/or industrial
research organisations, which
are authorised to invest in the
NCDs;
Partnership firms in the name
of the partners; and
Limited liability partnerships
formed and registered under
the provisions of the Limited
Liability Partnership Act, 2008
(No. 6 of 2009).
Note: All categories of persons who are individuals or natural persons (including Hindu Undivided Families
acting through their Karta) including without limitation HNIs and Retail Individual Investors who are eligible
under applicable laws to hold the NCDs are collectively referred to as “Individuals”.
All categories of entities, associations, organizations, societies, trusts, funds, partnership firms, Limited Liability
Partnerships, bodies corporate, statutory and/or regulatory bodies and authorities and other forms of legal
entities who are NOT individuals or natural persons and are eligible under applicable laws to hold the NCDs
including without limitation Institutional Investors and Non Institutional Investors are collectively referred to as
“Non Individuals”.
Please note that it is clarified that Persons Resident outside India shall not be entitled to participate in the
Issue and any applications from such persons are liable to be rejected.
Participation of any of the aforementioned categories of persons or entities is subject to the applicable
statutory and/or regulatory requirements in connection with the subscription to Indian securities by such
categories of persons or entities. Applicants are advised to ensure that Applications made by them do not
exceed the investment limits or maximum number of NCDs that can be held by them under applicable
statutory and or regulatory provisions. Applicants are advised to ensure that they have obtained the
necessary statutory and/or regulatory permissions/ consents/ approvals in connection with applying for,
subscribing to, or seeking Allotment of NCDs pursuant to the Issue.
The Lead Managers and their respective associates and affiliates are permitted to subscribe in the Issue.
Who are not eligible to apply for NCDs?
The following categories of persons, and entities, shall not be eligible to participate in the Issue and any
Applications from such persons and entities are liable to be rejected:
(a) Minors without a guardian name*;
(b) Foreign nationals, NRI inter-alia including any NRIs who are (i) based in the USA, and/or, (ii) domiciled in
the USA, and/or, (iii) residents/citizens of the USA, and/or, (iv) subject to any taxation laws of the USA;
(c) Persons resident outside India;
(d) Foreign Institutional Investors;
(e) Foreign Portfolio Investors;
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(f) Qualified Foreign Investors;
(g) Overseas Corporate Bodies; and
(h) Person ineligible to contract under applicable statutory/regulatory requirements.
*Applicant shall ensure that guardian is competent to contract under Indian Contract Act, 1872
Based on the information provided by the Depositories, our Company shall have the right to accept Applications
belonging to an account for the benefit of a minor (under guardianship). In case of such Applications, the
Registrar to the Issue shall verify the above on the basis of the records provided by the Depositories based on
the DP ID and Client ID provided by the Applicants in the Application Form and uploaded onto the electronic
system of the Stock Exchange.
The concept of Overseas Corporate Bodies (meaning any company, partnership firm, society and other
corporate body or overseas trust irrevocably owned/held directly or indirectly to the extent of at least 60% by
NRIs), which was in existence until 2003, was withdrawn by the Foreign Exchange Management (Withdrawal
of General Permission to Overseas Corporate Bodies) Regulations, 2003. Accordingly, OCBs are not permitted
to invest in the Issue.
No offer to the public (as defined under Directive 20003/71/EC, together with any amendments and
implementing measures thereto, the “Prospectus Directive”) has been or will be made in respect of the Issue or
otherwise in respect of the NCDs, in any Member State of the European Economic Area which has implemented
the Prospectus Directive (a “Relevant Member State”) except for any such offer made under exemptions
available under the Prospectus Directive, provided that no such offer shall result in a requirement to publish or
supplement a Prospectus pursuant to the Prospectus Directive, in respect of the Issue or otherwise in respect of
the NCDs.
Please refer to “Rejection of Applications” on page 197 of this Prospectus for information on rejection of
Applications.
Modes of Making Applications
Applicants may use any of the following facilities for making Applications:
(a) ASBA Applications through the Lead Managers, or the Trading Members of the Stock Exchange only in
